Solvency II Reporting Services for Investment Funds

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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.

SOLVENCY II

PILLAR I

Capital requirements

Assets & liabilities valuation

Technical provisions

Own funds

Solvency capital requirements

Minimum capital requirements

Investment rules

PILLAR II

Governance & supervision

Governance system

Supervision review

Groups control

PILLAR III

Disclosures

Public information

Supervision reporting

Legend:

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:

  1. Data acquisition and analysis
  2. Data enrichment (SQL, Matlab)
  3. Data processing, derivatives repricing and regulatory shocks
  4. Reporting generation and quality review
  5. Report delivery
  6. After-sales services (Q&A, KPI & dashboard report, additional requests…)

Contacts

Xavier Zaegel, FRM

Xavier Zaegel, FRM

Partner | Capital Markets/Financial Risk Leader

Xavier is a partner within the advisory and consulting department and is the head of the Capital Markets practice in Luxembourg. As a market and credit risk specialist, he has been leading various ass... More

Sylvain Crépin, FRM

Sylvain Crépin, FRM

Partner | Capital Markets/Financial Risk

Sylvain Crepin is Partner within Deloitte’s Financial Risk Management Department. He has specialised over the last 8 years in risk management advisory and quantitative risk solutions for investment fu... More