Moore Stephens Insight Solvency II Pillar 3 challenges

Moore Stephens Insight Solvency II Pillar 3 challenges April 2016 PRECISE. PROVEN. PERFORMANCE.

Pillar III Reporting and Validation

Pillar 3 high level recap of the principles Pillar 3 – Disclosure & Regulatory reporting • Aims to ensure consistent supervisory reporting and disclosure across the EU • Detailed harmonised reporting requirements still to be finalised • Insurers should be prepared to disclose more information publicly than at present • Will require two different but complementary reports: • Solvency and Financial Condition Report (SFCR) • Regular Supervisory Report (RSR) • Supported by Quantitative Reporting Templates (QRT)

Pillar 3 – Reporting overview Private Public Report to Supervisor (RSR) Solvency & Financial Condition Report (SFCR) Qualitative Annual Quantitative Annual (QRT) Annual SFCR Annex – some of the QRTs Quarterly © 2016 Moore Stephens LLP Contents • • • Target audience different Documents to be stand alone RSR has additional level of granularity over the SFCR NB – Quarterly reporting for all Reporting speeded up A. Executive Summary B. Business and Performance C. System of governance D. Risk Management E. Capital Management F. Additional disclosures on Internal Model G. Annex - QRT 1. Summary data 2. Own funds, MCR & SCR 3. Balance sheet and P&L account 4. Asset data 5. Revenue analysis 6. Life liability analysis 7. Non-life liability analysis 8. Risk analysis 3

Pillar 3 – PRA Reporting submissions timeline* 2015 2016 Solvency I Submissions Solvency II Submissions 2017 March 2016 Final Solvency I submission Preparatory phase returns Day 1 returns Cat 1 -3 firms only All Directive firms and groups On-going SII returns 1 Jul 2015 25 Nov 2015 20 May 2016 26 May 2016 25 Aug 2016 25 Nov 2016 25 Feb 2017 19 May 2017 Annual Qrtly One off Q 1 Q 2 Q 3 Q 4 Annual + NST Solos 15 Jul 2015 6 Jan 2016 20 May 2016 7 Jul 2016 6 Oct 2016 6 Jan 2017 7 Apr 2017 30 Jun 2017 Annual Qrtly One off Q 1 Q 2 Q 3 Q 4 Annual + NST Groups * For YE 3 st December firms © 2016 Moore Stephens LLP 4

The Reporting Challenge

Pillar 3 Challenges 01 Scale of Submission 02 Speed of Submission 03 Interconnectedness of Submission

01 Scale of Submissions Data Sets • • • – Pillar 3 reporting encompasses the following data sets: Balance Sheet Asset Technical Provisions Expenses Inwards & Outwards Premium Claims IT Systems • • • Exposure RI Recoveries IBNR Capital Qualitative Submissions – Pillar 3 returns are likely to extract data from various IT systems: Insurance Administration/Booking Systems Outward Reinsurance System Reserving System Capital Modelling Software IT Systems • Cover Holder System/s • General Ledger • Data Warehouse – Pillar 3 submissions include the following number of forms*: Variant Solvency Return Asset Data Reinsurance Returns Total Annual 40 11 8 59 Quarterly 8 6 - 14 *Maximum number of forms

01 Scale of Submissions Ø Form S. 19. 01 has 9 triangles to complete (gross, net, reinsurance) x (paid, incurred, RBNS) Ø 16 SII COBs x 7 SII Currencies = 112 form variants Ø 9 Triangles x 112 variants = up to 1008 triangles Producing a full Pillar 3 submission will be a sizeable undertaking in terms of TIME and RESOURCES

02 Speed of Submissions • By 2019, annual P 3 submissions will be due 8 weeks after YE • Quarterly submissions will required 3 weeks after the end of each quarter • Stress / Scenario test results may be requested by the PRA 2 -3 weeks after the end of each quarter (to maintain consistency with some of their regulatory counterparts in Europe) • National Specific Templates (NSTs) will be required in addition to regular submissions annually • Unless reporting process is optimised and automated it will result in a severe drain on resources and pose a real risk of regulatory breach NOT possible to prepare these submissions within the allotted timeframes using existing methods without investment in INTEGRATION and AUTOMATION Process Example: Data TPs Premiums Reinsurance Collate Data Store Data Transform Data Validate Data Adjust Data Sign Off Data Create XBRL

03 Interconnectedness of Submissions A. Form Validation • Submissions require that validation rules are ‘passed’ • EIOPA QRT submission is associated with over 500 validation rules / 3600 cross checks • Inter form validation rules will demand appropriate cross team co-ordination NOT viable to adopt a segregated approach to Pillar 3 reporting process: Interdepartmental coordination and data validation imperative

MS SII Engine vs Competition Functionality Full Pillar 1 SCR calculation and SII balance sheet SCR drill down analysis for all risk categories MS SII Engine FS Assist Tagetik SII Solution Full functionality and compatible with existing risk & capital models and data sources Solvency II Technical Provision TP, SII balance and SCR projections over multiple years Limited functionality and flexibility (partial solution) Stress and Scenario testing for ORSA Custom Risk MI and graphs Functionality to easily add new lines of business and forecasted business plan Interfaces with SII data warehouse and Interal models (ETL capability) Manual adjustment possible at every stage but designed for automation of key tasks Pillar 3 quantitative reporting output (QRT, SFCR and RSR) and XBRL Full Audit trail and version control Not available or require additional implementation package a

A long term cost-benefit evaluation Investment in Integrated SII Solution (MS SII Engine) Status Quo (persist with current processes & tools) Costs: Costs (High Probability – High Severity): • Software and Implementation • • Alignment and integration of current systems to SII Repository (based on proportionality) Opportunity costs of deploying unplanned resources (external / inter-departmental) at regular intervals to meet submission deadlines • Substantial drain on resources to co-ordinate interdepartmental data flow • Submission errors and related operational risks arising out of unplanned, ad-hoc resource allocation • Audit trailing, control and reconciliations require significant manual resource co-ordination and strict adherence to procedural set-up • Breach of SII regulations • Regulatory intervention / penalties • Reputational damage Benefits: • Complete automation of P 1 calculations and P 3 Reports • Significant reduction in production times (Typically 70% reduction in manual data entry) • Substantial savings in cost of deployed resources to meet regulatory submission deadlines • Compliance with SII guidelines • Fully audit-trailed and data mapped

Moore Stephens Solvency II engine Simplifying complex Solvency II Reporting April 2016 PRECISE. PROVEN. PERFORMANCE.

Partnership between Moore Stephens and Asseco in regards to SII for the London Market Actuarial Expertise Financial DWH Expertise 11/24/2020 SII Solution Expertise 14

Asseco Group – EU Top 10 software company Established in 1991 +18. 500 employees +1, 5 bln € annual turnover - Asseco Group 11/24/2020 15

Selected Asseco clients RSA Nordic Bulgari a DIFI 11/24/2020 16 16

Asseco – Delivering to the Insurance Sector 160+ 1000+ 20+ More than 160 Insurance Clients More than 1. 000 Insurance Professionals on board More than 20 years experience in delivering soutions for insurance sector Our products supporting all insurance business processes - Asseco Group 24 -11 -2020 17

Asseco SII Engine – Tried and tested +60 SII Engine Clients • • Denmark is moving ahead of EIOPA Insurance companies have since 1 st January 2014 reported • Annual on SII for 2013 and 2014 • Quarterly on SII, 3 times during 2014, 2 times during 2015 • Scenario analysis, stress test, reverse stress test SII Engine is the dominant Solvency II Solution with more than 35 Danish clients. Used by 60% - Asseco Group of DK top-10 11/24/2020 18

Solvency II Pillar 3 Key design challenge and our solution 11/24/2020 19

SII reporting – Same version of the truth ORSA Risk management Standard formula Calculation Kernel Reward strategy Business strategy Product Development SII data warehouse Outward Reinsurance Purchase 11/24/2020 Management of Business SFCR Management information Asset / Liability Management Investment Decisions QRT Risk mitigation Exposure management Economic capital allocation Regulatory capital Underwriting & Pricing Business Planning Financial Plans / Statements 20

Pillar 3 Reporting – Desired Solution Major solution characteristics: § Produces accurate results § Highly automated & cost effective § Covers end to end reporting process § Highly auditable e. g. version control of business rules/allocations/mappings § Transparent with clear data lineage § Consolidates data from multiple sources § Allows user entered manual adjustments § Gives early site of populated templates § Automated source to target reconciliation § Reload capability 11/24/2020 21

Our proposed solution for SII reporting • Flexible ETL • Able to handle multiple data source • Granular or aggregated data • SII data mapping • Possible to Interfaces with leading stochastic models • Handles both SF and IM • Built in SII data mart (option) Data Reporting • Rules based reporting • All PRA QRT reporting ready • Readily extend to other regulatory reporting 11/24/2020 Integration Capital Implementation calculation • Calculates all SCRrequirements using SF technical specifications • TP module • Pillar 2 stress tests • In- built validation 22

PIII Submissions Dates – YE 31 st December • Day 1 Quantitative reporting templates - areas Template name Template Code Basic Information - General S. 01. 02. 01 Balance Sheet S. 02. 01. 02 Own funds S. 23. 01 SCR S. 25. 01 MCR S. 28. 01 11/24/2020 Due Date PRA 20/5/2016 23

PIII Submissions Dates – YE 31 st December • Quarterly Quantitative reporting templates - areas Template name Template Code Basic Information - General S. 01. 02. 01 Balance Sheet Premiums, Claims and Expenses S. 02. 01. 02 S. 05. 01. 02 Assets Own funds S. 06. 02. 01 (List of Assets) S. 06. 03. 01 (Collective Investment undertakings- look-through approach) S. 08. 01 (Open Derivatives) S. 08. 02. 01 (Derivatives Transactions) S. 23. 01 Technical Provisions S. 17. 01. 02 MCR S. 28. 01 11/24/2020 Due Date PRA 1 st quarterly sub : 26/5/2016 Quarterly thereafter: 25/8/2016 25/11/2016 25/2/2017 24

PIII Submissions Dates – YE 31 st December • Annually - 20/5/2017 Template name • • Basic Information General Balance Sheet Premium claims and expenses Own funds/ Variation analysis • SCR • MCR • Assets 11/24/2020 Template Code • S. 01. 02. 01 • S. 02. (Balance Sheet/ Assets and Liabilities by currency) • S. 03. (Off-balance sheet items) • S. 04. 01. (Activity by country) • S. 05. (Premiums, claims and expenses by line of business/ Premiums, claims and expenses by country) S. 23. (Own funds/ Detailed information by tiers on own funds / List of items on own funds) • • S. 25. (Solvency Capital Requirement - Only SF) • • • S. 27. (Non-life catastrophe risk) S. 28. 01 S. 06. (Summary of assets/ List of assets/ Collective investment undertakings - lookthrough approach) S. 07. (Structured products) S. 08. (Derivatives) S. 09. (Income/ gains and losses in the period) S. 10. (Securities lending and repos) S. 11. (Assets held as collateral) • • • Template name • Technical provisions Template Code • S. 17. • S. 18. (Projection of future cash flows) • S. 19. (Non- Life insurance claims) • S. 20. (Development of the distribution of the claims incurred) S. 21. (Loss distribution risk profile/ Non-life underwriting peak risks/ Non-life underwriting mass risks ) • • • S. 30. (Facultative covers / Outgoing Reinsurance program) • S. 31. (Share of Reinsurer) • S. 29. (Excess of Assets over Liabilities) • S. 36 Reinsurance Excess of Assets over Liabilities IGT 25

SII Engine Pillar 1 & Pillar 3 Fully EIOPA and PRA Compliant SF SCR All Day 1, Quarterly Solo and Quarterly Group 11/24/2020 26

A Rules Engine for multiple regulatory regimes 2. Collection 1. Data sources SII Data areas 4. Calculation 3. Preparation 5. Reporting Data Sources Data repository Liabilities data Accounting data 4 Actuarial tools Finance systems Load/ Unload ETL Output adapter 3 Input adapter 1 a 1 b Report 2 b Calc. 5 b 2 a Asset man systems Assets data 5 a Port. Man. DWH Rating agency External data National Bank Other input data EIOPA SII • EIOPA SCR Lloyds SII • Partial internal model • Non-SII models SII Other Regulatory • EIOPA QRT • UK NST • Lloyds Returns • UK GAAP • Custom reports Own Schemas Rates FX 11/24/2020 27

EIOPA SII Engine – Audited and Assured • Ready to use standard solution fully compliant with the Solvency II directive • Proven - in production with +60 clients in 10 different countries Pillar III Pillar I 90% of Pillar III data mapped • 35 companies have used it for more than • 200 regulatory reportings • 120 Pillar II Stress tests ISAE 3000 Auditors declaration 11/24/2020 Solo & Group • Always EIOPA SII compliant – EIOPA updates guaranteed by Asseco • Handles both Solo & Group • Group Method 1 & 2 • Highly flexible Legal Entitiy setup • Full Pillar I SCR per Legal Entity • Aggregation on multiple levels • Partial portfolio calculations • RFF, Matching adjustments 28

Key functionality Standard solution for advanced but flexible handling of calculations and reporting § Spreadsheet flexibility for Finance, Risk Management & Actuarial Departments • Takes in any spreadsheet model and puts it under control – 5 step process § Covers end to end reporting process § Highly automated § Source to target reconciliation • Flexible handling – formulas, parameters, matrices, § Extensive controls and Roles & Rights management • Aggregation § Advanced audit trails and traceability • Apportionments/allocations • User entered adjustments – controlled and with audit trail § Easy configuration of Company specific reports • Full transparency and drill down capabilities with clear data lineage 11/24/2020 § Integrates with Moore Stephens Insurance framework and other system infrastructure 29

Full flexibility in regards to integration/data sourcing Data sources SII Data areas Data Sources Liabilities data Actuarial tools Accounting data Finance systems Asset man systems Assets data Port. Man. Rating agency External data National Bank Other input data 24 -11 -2020 Rates FX Collection and preparation Web based interface: manual entries and MS Excel uploads Calculation Reporting Low maintenance and high flexibility re. data source and project planning Point to point integration to: Actuarial kernels, Finance systems, Asset management, ALM systems, Automated Excel uploads E-T-L to/from your data repository: IBM Oracle Microsoft SAS Institute Asseco offers to deliver a SII data mart and to maintain this for you. 30

SII Engine Architecture 1. Data sources SII Data areas Liabilities data Accounting data 2. Collection and Preparation 3. Calculation 4. Reporting Data Sources Insurance systems Manual Entry is also and option Finance systems NL BE (Optional module) NL BE & Run offs Send to Regulator in XBRL Output adapter Claims prov. Cash flows Premium prov. Cash flows Asset man systems Assets data EDW Rating agency External data National Bank Load/ Unload ETL Data Mart Market Risk Counterparty Risk Health Risk Life Risk Other input data Rates FX Own schemas 31

Flexibility in regards to data sourcing - Example Non-life Run Off input SCR Non-Life results input based on calc. outside in actuarial system Best Estimates via Claims and Premiums history Per Lo. B – Claims and Premium 24 -11 -2020 32

SII Engine – Integration experience 2. Collection 1. Data sources SII Data areas Data Sources Liabilities data Actuarial tools Accounting data Finance systems Asset man systems Assets data Port. Man. Rating agency External data National Bank Other input data 3. Preparation Always SII compliant • No need to develop and maintain SCR calculation systems. • No need to develop and maintain QRT and FSVS reporting systems. • SII data model is maintained and upgraded We have experience in regards to integration to system infrastructure with: 4. Calculation Asseco SII server 5. Reporting AAE Output adapter QRTs SII Engine data mart SCR • Microsoft DWH solutions • SAS Institute solutions • Teradata DWH • • • Mo. Ses Igloo Inhouse developed TP calc. systems (Schantz Valuation) (Mo. net) • Sim. Corp Dimension • Wall street systems • Barrel One Rates FX 24 -11 -2020 33

SII Engine – Reconciliation, validations and approvals 1. Data sources SII Data areas Liabilities data Data Sources Actuarial tools 2. Collection 3. Preparation Source reconciliation 4. Calculation Asseco SII server Approval flows Finance systems Asset man systems Assets data Port. Man. Rating agency External data National Bank • Data input • Data output • EIOPA Cross checks • Generated results • Generated reports AAE Output adapter Approval workflows (multiple) can be set up in connection with: Accounting data 5. Reporting QRTs SII Engine data mart SCR Validations • Customer specific cross checks • Boundary checks • Validation reports – compare and alert (Management by exception) E-mail alerts Roles & Rights management Other input data Rates FX 24 -11 -2020 Everything is audit trailed 34

Latest EIOPA QRTs Annual Quarterly Solo Group Day 1 reports SFCR and RSR Cross checks Validations XBRL Custom reporting Lloyds Return UK NST 35 24 -11 -2020 35

Client Case RSA Nordic IBM • SII for +5 European countries • Detailing the SII data governance for the Group • Both Internal model and Standard formula • Solo and Group reporting for UK • Group reporting for all European companies based on consolidated data and applied Group adjustments 11/24/2020 SAS • SII for 4 Nordic companies • Both Internal model and Standard formula • Reporting in 2 different countries • Solo and Group reporting • Delivering SII data to RSA HQ 36

Client Case Asseco integrates the SII data mart to your data warehouse, which enables you to: • Full insight to required SII data input – SCR and QRTs • Ease the identification of data gaps • Prepare full data in own DW • Reuse existing DW governance • Reuse existing ETL SAS • Utilize existing data quality assurance routines • Use existing SOP’s & system support correcting data • Work on multiple reporting periods simultaneously • Check completeness of input data set Client Case • Validate data inputs • Customize your own set of tables and add to SII Engine data mart • Utilize SII data for other purposes (Internal reporting, BI, pricing modules etc. ) 11/24/2020 • • • SII Engine integrated to DW using data mart Integrated within 3 months 15 -20 Asseco man-days (same for client). Deployed to SAS Technology DW Igloo actuarial kernel 99% of data volume is data sourced automatically 37

Client Case One solution Fast installation (1 week) – complementing existing systems Integrated Teradata DWH, SAS Institute Analytics, Mo. Ses, Wall Street systems Secure Web based solution Easy & secure access, no matter the location. EIOPA compliant Always in accordance with Solvency II specifications by EIOPA Local flexibility Easy to adapt to National Specific requirem. Controls and audit trails User management, controls and complete audit trails across entire organization. A coherent and controlled Solvency II performance Client Case • • • SII Engine integrated to DW using data mart Integrated within 6 months 15 -20 Asseco man-days Deployed to Teradata and SAS Technology DW Mo. Ses actuarial kernel Partial internal model 38

Client Case – Life assurance firm 39

Control the differences Diverse reporting requirements • • • HQ required templates EIOPA templates National specific templates • Excel, XBRL, XML, Others HQ Regulator HQ QRT Sub 1 Reports Comply with requirements from HQ level to subsidiary level. Sub x Reports Control, transparency and audit trails All templates and reports can be shipped between different companies in the Group, fully controlled and in a complete transparent and auditable environment. Sub X Regulator QRTs Manage differences between subsidiaries, and make sure the group is compliant and coherent in all SII reporting matters HQ Reports SCR Calc. 40

SII Engine Pillar 2 Capital projections Stress and Reverse Stress testing 41

SII Engine – Pillar II Stress testing • Ready to use standard solution fully compliant with the Solvency II directive • Proven - in production with +50 clients in 7 different countries 90% of Pillar III data mapped Pillar III Pillar I • 35 companies have used it for more than • 200 regulatory reportings • 100 Pillar II Stress tests • Always EIOPA SII compliant – EIOPA updates guaranteed by Asseco ISAE 3000 Auditors declaration Pillar II • Stress test, reverse stress test and sensitivity analysis • Forward looking - SCR - SII Balance • Support of ORSA process • System of Governance • ORSA Reports • Risk Appetite • Etc. 42

SII Compliance & Risk Management § Policies and Guidelines Risk appetite § Process Risk identification § Capital planning Risk monitoring and reporting Risk evaluation § Forward looking assesment Risk handling § Stress test & scenarios 7. Earnings risk 8. Strategic risk 9. Liquidity risk 10. Operational risik 11. Control risik 12. Settlement risk 13. Reputuational risk 12 11 10 9 11/24/2020 Økonomisk omfang 8 1. Non-life risk 2. Life risk 3. Market risk 4. Counterparty risk 5. Health risk 6. Concentration risk 1 7 6 5 4 3 4 2 1 0 0 1 2 3 4 5 6 Sandsynlighed 7 8 9 10 11 4 12 43

Forward looking assessment SCR and SII Balance sheet Base year for the Forward Looking assesment is the current SCR calculations Base year Capital plan Input 3 -5 year Strategy & Growth forecast 44

Regulator’s predefined stress and reverse stress test scenarios Base year Stress factors can e. g. include: Stress test module Multiple periods § Interest rate risk - yield curve § Equity shocks § Property shocks § Spread risk - decrease in market value of bonds § Type 1 Counterparty risk § Premium growth - Line of Business volume changes § Catastrophe risk - e. g. Windstorm § Claims provision changes § Premium provision changes 45

Multiple period stress testing - single factor and/or multi factor Single Factor Single period Multi Factor Stress Test Single Factor Multi period Base year Multi Factor Stress test module Multiple periods 46

Custom reporting MI • All risks • Company relevant risks Variables can be customised to client specific requirements. • Risk per risk group or risk driver • Top 10 risks • Risk maps • Realised vs. Risk appetite • Historic comparisons • Reports per risk ambassador or risk owner 47

Further information Omar Ripon Partner omar. ripon@moorestephens. com David Sweet Partner David. sweet@moorestephens. com Bo Ørskov Koldenborg Partner bo@asseco. dk 48