Solvency II Reporting Services for Investment Funds
Deloitte’s integrated solution servicing world-class asset managers
Solvency II (Directive 2009/138/EC) is a European reform applicable to insurance and reinsurance undertakings which came into effect on 1 January 2016.
What is Solvency II?
Consistent with other financial services legislation such as the Basel III framework for banking supervision, Solvency II is a regulatory framework applying to European insurance and reinsurance undertakings and has been organized into three pillars: Pillar I focuses on Solvency Capital Requirements (SCR), Pillar II on governance and supervision, while pillar III focuses on disclosures and supervisory reporting.
Assets & liabilities valuation
Solvency capital requirements
Minimum capital requirements
Governance & supervision
Impact for Asset Managers & Asset Servicers
Impact only for Insurance Undertakings
Solvency II Framework
Pillar I: Capital requirements
Pillar I considers the quantitative requirements of the regulation, including the calculation of technical provisions, the rules relating to the calculation of solvency capital requirements and investment restrictions.
Two Solvency requirements :
- The Minimum Capital Requirements (MCR)
- The Solvency Capital Requirements (SCR), covering their assets and liabilities.
Pillar II: Governance & supervision
Pillar II deals with the qualitative aspects of an insurer’s internal controls, risk management process and defines its risk appetite framework.
Pillar II includes the Own Risk and Solvency Assessment (ORSA) and the Supervisory Review Process (SRP):
- Data governance should be defined to ensure the quality of the sourcing
- All processes should be documented and readily available in case the regulator requests an on-site inspection
- Own Risk and Solvency Assessment (ORSA) should be periodically conducted
Pillar III: Reporting & Disclosures
Pillar III is concerned with enhancing disclosure requirements in order to increase market transparency and ease comparability.
Companies must interpret the disclosure requirements, develop a strategy for disclosure and educate key stakeholders on the potential impact:
- Asset Managers should provide insurance undertakings with relevant information required for the Quantitative Reporting Templates (QRT & annual disclosure)
- All reports are submitted to the regulator by the insurance undertaking
- The final reports might be audited
Solvency II for Asset Managers: Key challenges
Insurance companies delegate a large part of their asset management and therefore rely on the asset management industry to provide them with the input data necessary to fulfil their regulatory capital estimation and disclosure obligations. The investment fund industry is facing four main challenges in meeting the Solvency II reporting requirements: flexibility and timing, regulatory challenges, data management, and processing.
Deloitte Solvency II Factory and Reporting services for Investment funds
Deloitte has developed an integrated solution to assist asset managers with their Solvency II reporting:
- Helping asset managers leverage on their data to meet their investors’ requests
- Producing analytics reporting to their insurance clients
- Providing advisory services in the structuring of their investment products
The key steps of this solution are:
- Data acquisition and analysis
- Data enrichment (SQL, Matlab)
- Data processing, derivatives repricing and regulatory shocks
- Reporting generation and quality review
- Report delivery
- After-sales services (Q&A, KPI & dashboard report, additional requests…)
Basel III, CRR, Solva, VAG, GroMiKV, Solvency II, SCR
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