EIOPA have recently launched a consultation on draft amendments to EU regulations on the quantitative reporting templates (QRT) and the solvency and financial condition report (SFCR). Comments are requested by 17 October 2021.
The proposals include a relatively large number of changes and some new reports which, if approved, will be part of the quarterly and annual submissions going forwards.
The changes will be incorporated in taxonomi version 2.7.0 and will apply from the end of 2022.
This article details some of the main changes which insurers should begin planning for.
Proposed changes to existing templates
A number of templates have been simplified, for example in report S.02.02 (assets and liabilities by currency), asset details will no longer be required as currency is reported in the asset list (S.06.02).
For other templates additional information will be required, e.g. in the list of assets where the following additional information is proposed:
- Custodian code
- Whether assets issued or guaranteed by Regional Governments and LocalAuthorities are listed in the implementing technical standards (ITS)
- Whether the asset is subject to bail-in rules
- Crypto-asset type
- Property type
- Property location
- Whether equity or funds are classified as long-term
- Issue date
The requirements around some existing data are also tightened, for example NACE sections A to N require full four-digit reporting of the NACE codes, i.e. the letter identifying the section followed by the four digit code for the class shall be used (e.g. ‘K6411’)
Note that the above changes are simply examples and a large number of other templates will be amended under the proposals.
Several non-core templates are being removed altogether or replaced:
S.03.02 and S.03.03 (unlimited guarantees received/provided) gets deleted
S.04.01 and S.05.02 (cross-border business) gets replaced with a new reports S.04.03, S.04.04 and S.04.05.
S.06.01 (asset summary) gets deleted
S.08.02 (derivative transactions) gets deleted
S.15.01 and S.15.01 (variable annuities) gets deleted
S.25.02 and S.25.03 (Internal models) gets replaced by a number of new S.25 and S.26 reports
In addition, a new non-life variation analysis template S.29.05 replaces parts of templates S.29.03 and S.29.04.
Proposed new templates
In addition to the changes mentioned above, other new templates will cover items not previously reported:
S.06.04 - Sustainable investments and climate change related risks
This new report will introduce three sustainability and climate change related reporting requirements on assets:
Sustainable investments: Proportion of the investments, in relation to total of investments, that are directed at funding or associated with economic activities identified as environmentally sustainable in the EU taxonomy.
Climate change related transition risk – KPI: Proportion of investments, in relation to total of investments, exposed to transition risk. Undertakings can use their own methodology to compute the KPI.
Climate change-related physical risk – KPI: Proportion of investments, in relation to total of investments, exposed to physical risk. Undertakings can use their own methodology to compute the KPI. To support the identification of properties exposed to physical risk, undertakings shall report on the latitude & longitude of the property location. If not possible, undertakings shall report the country ISO Alpha-2, postal code, city, street name and street number of the property in S.06.02.
EIOPA seek feedback on materiality thresholds in S.06.04 and methodology for reporting of physical risk for investment other than property
S.14.02 Non-life business
This new template will cover policy and customer information for non-life and corresponds to S.14.01 for life
S.14.03 Cyber risk
Template covering policy and customer information for cyber underwriting risk
S.14.04 and S.14.05 (life & non-life) Liquidity risk
Collecting product level information on claims, cashed premiums, unearned premiums and fiscal treatment allows EIOPA to build stylised treasury like flows of insurers which facilitate estimating the sustainability of the liquidity position. Duplication with regular reporting template is kept to a minimum.
S.25 and S.26 (SCR) Templates for internal model users
A number of new templates have been introduced for companies using internal models for SCR calculation.
Loss absorbing capacity of deferred taxes (LAC DT) – Significant changes proposed
Additional information in the balance sheet report S.02.01 and some new templates are intended to support an initial assessment by supervisors on the adequacy of LAC DT.
Balance sheet information for temporary differences is proposed where the amount of net deferred tax assets or the amount of net deferred tax liabilities are higher than 10% of the SCR. This is achieved by the addition of two new columns in S.02.01:
A new template is also proposed with pre and post stress values replacing S.25.XX.03-05:
A further two new templates detailing 10 year profit projections before and after stress are proposed. These represent a significant increase over the current requirements as illustrated by the post stress tables below:
In summary, the proposed changes are significant. Although the exact timing of implementation is uncertain, insurers should review the changes and assess the need for any changes in systems or processes.
Feedback on the proposals can be provided to EIOPA using this template.