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Solvency II reporting changes for small insurers and friendly societies

Solvency II
Actuarial, Life insurance, Mutuals, PRA / Bank of England

06 March 2018

In January, the PRA announced it consultation (CP2/18) into a number of reporting changes to “reduce the burden” on Solvency II firms. This consultation closes on 13 April 2018. The purpose of this article is to highlight the key proposals which impact on small insurers and friendly societies with life business (hereafter referred to as “relevant firms”). Whilst we are in midst of the latest round of Solvency II work, these changes would not be relevant until 2019 (financial year-end 2018 submissions).  The proposed changes are only in respect of the National Specific Templates (NSTs) which are specifically required by the PRA.

NS.01 With-profits value of bonus and NS.02 with-profits assets and liabilities

“The PRA proposes to limit submission of NS.01/NS.02 to with-profits firms where the with-profits best estimate liabilities are more than £500 million.”

These templates are not seen as too much of a burden, but the limitation is welcomed for relevant firms which fall under the threshold.

NS.05 Revenue account life

“The PRA proposes to remove the requirement to submit information relating to a reconciliation of assets at the start and finish on a net basis.”

This change actually represents very little simplification. Arguably, this template requests information very similar to the content of the harmonised EIOPA templates. This leaves us to wonder how much additional value the PRA is getting and whether this specific template should be restricted to an analysis of claims.

NS.06 Business model analysis (life)

“The PRA is clarifying that best estimate liabilities and risk margin should be reported before adjustment for the transitional measure on technical provisions (TMTPs) which is now being requested as a separate item.”

Relevant firms will not have to complete this template if gross technical provisions for life business (including health similar to long-term business) are less than £500m.

NS.09 Best estimate assumption for life risk

“The PRA is adding a clause that exempts firms from reporting data for sub-categories 2 and 3 where the previous line(s) already cover at least 50% of the business for that product (in terms of number of policies).”

We welcome this proportionate approach, however, many firms already benefit from the credibility statement ("Firms are not required to show experience where this is of low credibility. A guideline for low credibility is less than 200 claims per annum for an individual line of the template."). 

Conclusion

There were no other notable proposals for small life insurers and friendly societies within the CP, except where some firms may wish to query with the PRA whether they could now be applicable for quarterly exemptions.

The PRA is clearly acknowledging a more proportionate response to reporting for lower risk firms which we welcome, however, we would support additional proposals/changes to further this reduction or simplification of requirements. Alongside the reporting submissions, we await an update from the PRA on whether the external audit of SFCR is required for smaller insurers and friendly societies.

We encourage relevant firms to respond to the CP (by 13 April 2018) and to ensure the PRA’s continued focus on proportionate reporting for Solvency II.

Related information:

David Gray

For more information
David Gray
Consultant Actuary

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