CB consults on NSTs under Solvency II
 

THE Central Bank has issued a new Consultation Paper (CP89) concerning National Specific reporting Templates (NSTs) to address requirements specific to the Irish market and the nature of insurance companies it supervises which are not catered for in the set of Solvency II reporting templates being developed by EIOPA.

The proposed NSTs will generally apply to all insurance and reinsurance undertakings supervised by the Central Bank (CB) and which are rated as high or medium high impact under the PRISM supervisory regime and to groups of which the Central Bank will be the Group Supervisor under Solvency II. In addition, certain templates will apply to all undertakings which transact Variable Annuity (VA) business. The CB says that the additional NSTs will offer the supervision teams the financial information necessary to perform a risk assessment of the respective companies in addition to performing peer analyses of the entities.

There will be 11 NSTs in total of which 6 are specific to non-life. 4 of the 5 life NSTs are specific to VA business and only one applies to all medium high and high rated life companies. The latter relates to the Income Statement and is stated to be a repeat of information currently received with additional details on claims categorisation by line of business.

The non-life NSTs are also stated to be largely a repeat of information currently received with additional splits by line of business, distribution channel and territory. The CB points out that it needs this granularity annually and quarterly to identify claims and reserving trends as these can vary significantly by the three factors. In fact the granularity goes quite deep. For example, for technical reserves, premiums, expenses and claims, as well as future cash flows, Motor Vehicle business will need to be split into Personal and Commercial, Bodily Injury and Property damage, and Liability business will need to be split into Employers and Public.

The 4 templates applying to Variable Annuity business are based on those set out in the recently completed VA Risk Monitor consultation with the relevant companies. Three of them deal with daily attribution and the fourth considers a wide range of stress tests for equity, interest rate, currency and volatility risks as well as for combined risk scenarios. The CB also raises a number of issues on which it would welcome input, including alternative parameterisations of the stress tests. Its requirement for consistency across the industry in this regard is somewhat at variance with the Own Risks approach central to Solvency II and the interaction of the NSTs with existing components of the company’s risk management framework is one of the issues on which comments are sought.

It is likely that the CB will get plenty of feedback. The VA companies for one believe that their supervisory regime is becoming overly onerous. On the other hand the Central Bank points out that Ireland has a greater concentration of VA companies than any other Solvency II jurisdiction and that the special risks of this business are not appropriately captured in the current harmonised templates. The consultation is open until 9th January 2015 with the final requirements due in Q1.