Review of Solvency II: Reporting Phase 2

On 17th December 2021, the PRA published the ‘Review of Solvency II: Reporting (Phase 1)’, with the aim of streamlining certain onshore Solvency II reporting requirements by removing the requirement to produce certain Quarterly Reporting Templates (QRTs), reducing their reporting frequency and extending the quarterly reporting waivers. These phase 1 reforms came into effect on 31st December 2021, and have reduced the volume of templates reported to the PRA, especially for small and mid-sized firms.

In November 2022, the PRA started a consultation on the second phase of its reporting and disclosure reforms, this builds upon phase 1 and is intended to introduce changes to better reflect the features of the UK insurance market and improve general regulatory oversight.

We outline below the key proposals emanating from the consultation.

Removal of QRTs

The PRA has proposed removing 12 QRTs considered to have limited value to its supervisory approach and could be covered by other reporting templates. These include:

• S.05.01 Premiums, claims and expenses, split by line of business;

• S.08.02 Derivatives transactions;

• S.30.01 Facultative covers for non-life and life business basic data;

• NS.05 Revenue account life

Changes in reporting frequency for certain QRTs

The PRA propose reducing the reporting frequency of 4 QRTs, including introducing a distinction for insurance group/solo reporting and supporting third-country branches. For example, for S.06.03: ‘Collective investment undertakings’, a look-through reporting approach is proposed to cut mandatory disclosures to bi-annually, at Q2 and Q4, for solo and branch reporting, and annually, at Q4, for group reporting.

Reporting thresholds

The PRA is also suggesting an amendment to existing, or an introduction of new, reporting thresholds to aid in defining the scope of application of 9 QRTs/NSTs (National Specific Templates). Only insurers that exceed the proposed threshold would be required to report the templates. For example:

• S.03.01 Off-balance sheet items – general

• S.05.02 Premiums, claims, and expenses by country

• S.30.07 Life reinsurance proportional cover

Changes to the design of QRT and NST disclosure templates

The proposed template amendments cover a range of areas, including outward reinsurance, solvency capital requirements, own funds and specific activity divided by country and business line. While some amendments would involve adding or removing aspects of existing templates, some amendments would introduce new reporting features.

For example, SCR results are currently reported using three summary templates which depend upon the basis of calculation. To simplify, the PRA proposes deleting existing SCR templates (S.25.01 to S.25.03) and replacing them with new SCR reporting templates that would cover the SCR for all bases of calculation.

Reporting on new topics

To ensure disclosures are future-proof, the PRA has proposed introducing three new reporting templates to disclosure information on emerging areas of risk:

• Excess capital generation (ECG) to report the total amount of ECG during the most recent reporting year and expected ECG in the next 3 years. It only applies to life firms writing non-unit-linked premium business exceeding £1 billion on an annual basis.

• Cyber underwriting risk to reveal information around the nature of cyber risk coverage, the potential accumulation of risks and risk mitigation techniques.

• Non-life obligations analysis to collect information on contract/policyholder numbers, premiums, claims and insured property coverage, split by line of business and non-life product type.

In addition, several changes to internal model templates are proposed. For example, expanding the data collected on corporate bond spread calibration by splitting it into financial and non-financial components, where available.

Next Step

The consultation closed on 8 May 2023, and the PRA intends to implement these changes on or after 31 December 2024.