Solvency II and XBRL Carlos Montalvo Rebuelta 19

Solvency II and XBRL Carlos Montalvo Rebuelta 19 th XBRL International Conference, Paris, 24 -6 -2009

CEIOPS Outline • CEIOPS: work & structure • Intro to Solvency II • Reporting requirements • XBRL consideration

CEIOPS: work & structure

CEIOPS Structure Working Groups Consultative Panel Managing Board Members´ Meeting Chair: Thomas Steffen, Germany Solvency II: Financial Requirements Expert Group Financial Stability Committee Pauline de Chatillon, France Kajal Vandenput, Belgium Internal Governance, Supervisory Review and Reporting Expert Group Occupational Pensions Committee Gabriel Bernardino, Portugal Tony Hobman, United Kingdom Internal Models Expert Group Consumer Protection Committee Paul Sharma, United Kingdom Victor Rod, Luxembourg Insurance Groups Supervision Committee Convergence Committee Petra Faber-Graw, Germany Raffaele Capuano, Italy Review Panel Michel Flamée, Belgium Secretariat Secretary General: Carlos Montalvo

CEIOPS’ main work streams Draft CEIOPS Work Programme 2009: • Insurance sector: Ongoing Solvency II workload • Occupational Pensions work • Supervisory culture, convergence and cooperation • Financial Stability, accounting and international relations • Consumer protection and market conduct • 3 L 3 work

CEIOPS work le p am x e Input Calls for Advice Procedures Meetings, deskwork, braimstormings… Results Balanced views Additional mandates Consultation with stakeholders CEIOPS’ own work plan Workable solutions

Intro to Solvency II

CEIOPS Welcome to Solvency II. . .

CEIOPS THE SOLVENCY II PROJECT Solvency II • Framework dates from the 1970 s • A risk oriented approach • ‘Prudent’ valuation of liabilities reflect local accounting practices • Unified legislative basis for prudential regulation of insurers & reinsurers • Relatively simplistic ‘volumebased’ capital requirements • Asset risk managed by quantitative restrictions rather than capital • No provision for risk review • Non-zero failure regime • Three pillar structure, based on Basel II • Link to IASB work • Employs Lamfalussy arrangements

CEIOPS A new structure for insurance supervision Insurance supervision: solo and groups Pillar 1 l l Quantitative requirements Technical provisions (BE and risk margin) 2 capital requirements (MCR and SCR – SF/IM) Prudent person investment rule Own funds (3 tiers) Total balance sheet approach Market-consistent valuation (fair value) Validation of internal models Pillar 2 Pillar 3 Qualitative requirements l Internal control and risk management (incl. ORSA) l Supervisory review process (qualit. & quant - Add-ons) Reporting Focus on firm’s responsibility Convergence of supervisory practices l l l Supervisory reporting Public disclosure Market discipline Convergence of supervisory reporting More pressure from rating agencies, capital markets

Reporting Requirements

CEIOPS Reporting requirements to the supervisors Information to be received by the supervisory authority Report to Supervisors (RTS) Art. 35(1) Solvency and Financial Condition Report (SFCR) Art. 50 All information necessary for the purposes of supervision Publicly disclosed information - Qualitative report - Quantitative reporting templates -Qualitative report -Quantitative reporting templates Art. 35(2) (a) (ii) and Art. 53(1) – upon occurrence of predefined events Art. 35(2) (a) (iii) – during enquiries regarding the situation of an undertaking

CEIOPS Solvency II & other reporting stakeholders Some potential reporting overlapping Solvency II: § Internal reporting, including the ORSA § IFRS/National GAAP § Tax reporting § Central banks § Central Statistical Bureau

CEIOPS Decisions to be taken before using XBRL § Consult stakeholders § Discuss among members § Consider Impact Assessments for both industry and supervisors

CEIOPS Challenges § Common set of information supplemented with national specificities still to be developed and agreed § Definitions and taxonomy still to be developed § Different level of previous XBRL practises among both industry and supervisors § Is it appropriate to introduce XBRL requirements together with Solvency II considering to expected workload ?

CEIOPS Opportunities § More smoothly exchange of information between supervisors § Cross border groups benefits from standardised requirements § Easier to build centralised databases for Financial Stability objectives

CEIOPS Risks ? § Among industry and/or supervisors some will not be able to fulfil timely reporting requirements – not appropriate especially in a crisis situation § Potential lack of XBRL experts around to develop functions § SME insurers increased burden/costs § National specificities and updates of contents are not easy to implement

“ Experience is the name we give to our mistakes “.

Thank you! Carlos. montalvo@ceiops. eu