The PRA have today (July 8th) released their proposed changes to the Solvency II regime in respect of reporting requirements and expectations [CP11/21 'Review of Solvency II: Reporting (Phase 1) (bankofengland.co.uk)]. The proposals set out in this first phase of the Solvency II review are designed to reduce the burden on firms, to make the reporting regime more proportionate and hopefully improve the overall efficiency of the market. The PRA considers this first phase could be implemented quickly, with low impact on firms’ resources and at negligible cost.
The key changes being proposed, which are relevant to all UK firms under the Solvency II regime, are:
- removing the requirement to report certain Solvency II Quantitative Reporting Templates (QRTs) and increasing the threshold for reporting on certain non-life annuities,
- removing the requirement for firms granted a reporting exemption to submit information at the first and third quarter of their financial year (reflecting a reduction in the frequency of MCR reporting in template S.28 (from quarterly to semi-annual)), and
- expanding the PRA’s current reporting exemption for Category 4 and 5 firms to include Category 3 firms.
As part of the consultation, in addition to the required changes to the onshored version of Regulation (EU) 2015/2450 (the Delegated Act), the PRA have set out the corresponding amendments required to the PRA’s rulebook, relevant supervisory statements and PRA’s Statement of Policy. Changes to one supervisory statement (SS11/15) formalise the changes in what information is to be reported quarterly and by whom. Changes to the other supervisory statements are largely a tidy up, including references to retained EU law and the PRA’s UK specific rulebook.
Firms will be required to implement these proposals in their reporting (both quarterly and annual) for reporting dates commencing from 31 March 2022.
The PRA is inviting feedback from firms and advisers on the phase 1 proposals by Friday 8 October 2021.
Cara Spinks, Consultant Actuary at OAC, comments: “The proposed reduction in reporting requirements is welcomed, particularly for smaller firms who will proportionally see a greater benefit both from the removal of first and third quarter reporting, and from the removal of certain reporting templates from the annual submissions. Some of the proposed templates for removal, relating to the analysis of surplus, are poorly understood and add an unnecessary layer of complexity to a process that is already embedded into good valuation practice. Reducing the frequency of reporting for the MCR also seems sensible given its relative stability for most firms, and the fact that it is only of real significance to firms with low coverage of SCR and who merit closer supervision by regulator.
However, we think there is scope for the regulator to go further, and consideration could be given as to whether the list of assets template is essential, and whether key information couldn’t be sourced elsewhere. This template requires large amounts of data and any continuation in its current form ought to be justified by the regulator. We would also like the regulator to consider the removal of quarter 4 reporting altogether for smaller firms.
The second phase of this review is expected to be more comprehensive, with potentially significant changes impacting some of the technical components of the Solvency II calculations. The quantitative impact study (QIS) to be launched by the PRA this summer will be used to investigate the impact of various reforms and support phase 2 of this review, which will be consulted on in 2022. It is hoped that the resulting changes will mean even more efficiencies for firms in due course.”
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