CP 14/22 – Review of Solvency II: Reporting phase 2

The PRA have recently issued a new Consultation Paper (CP) on changes to the Solvency II reporting requirements. This CP is a direct consequence of the announcement in 2020 by HM Treasury of a review of Solvency II and the subsequent Call for Evidence. It follows on from Policy Statement PS 29/21 Review of Solvency II: Reporting phase 1 which was published in December 2021. This second phase builds on the phase 1 reporting changes and proposes more comprehensive improvements.

Responses to this consultation phase are required to be submitted by Monday 8^th May 2023.

Following the UK's withdrawal from the EU, the PRA considers that the reporting requirements can be streamlined significantly and tailored to reflect the features of the UK insurance sector more appropriately, whilst continuing to meet the PRA’s statutory objectives. The changes proposed in this CP are far reaching and could have a significant impact on how the rules are defined and for the content and frequency of the disclosure and reporting requirements for insurers under Solvency II.

The proposals include:

• the removal of a number of Solvency II Quantitative Reporting Templates (QRTs) and relevant National Specific Templates (NSTs),
• a reduction in the reporting frequency of certain templates,
• the consolidation of some templates where current templates cover the same topics,
• the introduction and amendments of reporting proportionality thresholds for certain reporting and disclosure templates,
• the introduction of three new templates covering new reporting topics.

Note this CP does not cover some of the non-reporting topics also being considered by HMT’s review of Solvency II such as matching adjustment, risk margin, transitional measures on technical provisions, internal models and Group SCR requirements. These will be consulted on separately at a later date.

There are 12 existing templates that are proposed for deletion, although only a small subset of these will be applicable to the smaller mutual insurers. Three new templates are proposed:

• Excess Capital Generation – this would only be applicable to life firms writing non-unit linked premiums exceeding £1bn p.a.
• Cyber Underwriting Risk – to monitor firms that are materially exposed to underwriting cyber risks.
• Non-life obligations analysis – equivalent in nature to the existing template S.14.01 on life obligations analysis.

Various amendments to other templates are proposed which aim to remove data items for which the PRA can collect the data from other templates and introduce some new requirements to allow the PRA to capture certain items of data that it requires to see.

The current reporting requirements are defined within the PRA Rulebook and across various pieces of EU regulations and Implementing Technical Standards (ITS). The PRA proposes to consolidate all of the changed requirements within the PRA Rulebook bringing all the reporting requirements together. The changes will be implemented within a new taxonomy and UK Solvency II insurers would cease reporting to the PRA using the EIOPA authored taxonomy from the implementation date. Therefore whilst it may be that for some insurers the actual reporting requirements will not alter significantly, it will be necessary to update existing reporting systems to work with the new taxonomy.

The proposed implementation date for changes resulting from this CP would be for quarterly and annual reporting reference dates falling on or after 31/12/2024. The PRA aim to introduce these changes at the same time as other changes under proposed Solvency II reforms in order to minimise the burden on firms making multiple changes to reporting systems.