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The
Solvency and Financial Condition Report
from the Solvency ii Association
the largest Association
of Solvency ii Professionals in the world
What
is the
Solvency and Financial Condition Report?
From the Amended Proposal for a Directive on the taking-up and
pursuit of the business of Insurance and Reinsurance (SOLVENCY II)
Public Disclosure - Articles 50 to
55
The proposal requires undertakings
to disclose annually a report covering
essential and
concise information on their
solvency and financial condition.
An exception is possible for
individual capital add-ons for a transitional period.
Undertakings are required to
update the information disclosed where
appropriate (specific provisions address cases of non compliance
with Minimum Capital Requirement or Solvency Capital Requirement),
and they are allowed to disclose additional information on a
voluntary basis.
Undertakings are required to have a
policy on public disclosure, and must
obtain approval from their administrative or management body on the
solvency and financial condition report before publication.
Finally, the proposal allows the
adoption of implementing measures with a view to ensuring
convergence as appropriate.
Article 54
Report
on Solvency and financial condition:
policy and approval
1. Member States shall require
insurance and reinsurance undertakings to have appropriate
systems and structures in place to
fulfil the requirements laid down in Articles 50, 52 and 53(1), as
well as to have a written policy
ensuring the on-going appropriateness of any information disclosed
in accordance with Articles 50, 52 and 53.
2. The
solvency and financial condition report shall be subject to
approval by the
administrative or management body
of the insurance or reinsurance undertaking and
be published
only after that approval.
Article 55
Solvency and financial condition
report:
implementing measures
The Commission shall adopt
implementing measures further specifying the information which must
be disclosed and the means by which
this is to be achieved.
Those measures designed to amend
non-essential elements of this Directive, by
supplementing it, shall be adopted
in accordance with the regulatory procedure with scrutiny
referred to in Article 304(3).
Article 260
Group
solvency and financial condition report
1. Member States shall require
participating insurance and reinsurance undertakings or
insurance
holding companies to publicly disclose, on an
annual basis, a report on the
solvency and financial condition
at the level of the group.
Articles 50 and 52 to 54 shall
apply
mutatis mutandis.
2. Where a participating insurance
or reinsurance undertaking or an insurance holding company so
decides, and subject to the agreement of the group supervisor, it
may provide a single
solvency and financial condition report which shall comprise
the following:
(a) the information
at the level of the group which must be
disclosed in accordance
with paragraph 1;
(b) the information
for any of the subsidiaries within the
group which must be
disclosed in accordance with
Articles 50 and 52 to 54.
3. Where the report referred to in
paragraph 2 fails to include information which the
supervisory authority having
authorised a subsidiary within the group requires comparable
undertakings to provide, and where the
omission is material, the supervisory authority concerned
shall have the power to require the subsidiary
concerned to disclose the necessary additional information.
European Parliament legislative resolution of 22 April 2009 on the
amended proposal for a directive of the European Parliament and of
the Council on the taking-up and pursuit of the business of
Insurance and Reinsurance
Article 54
Report on solvency and financial condition: policy and approval
1. Member States shall require insurance and reinsurance
undertakings to have appropriate systems and structures in place to
fulfil the requirements laid down in Articles 50, 52 and 53(1), as
well as to have a written policy ensuring the on-going
appropriateness of any information disclosed in accordance with
Articles 50, 52 and 53.
2. The solvency and financial condition report shall be subject to
approval by the administrative or management body of the insurance
or reinsurance undertaking and be published only after that
approval.
Article 55
Solvency and financial condition report: implementing measures
The Commission shall adopt implementing measures further specifying
the information which must be disclosed and the means by which this
is to be achieved.
Those measures designed to amend non-essential elements of this
Directive, by supplementing it, shall be adopted in accordance with
the regulatory procedure with scrutiny referred to in Article
304(3).
Article 260
Group solvency and financial condition report
1. Member States shall require participating insurance and
reinsurance undertakings or insurance holding companies to publicly
disclose,
on an
annual basis, a report on the solvency and financial condition at
the level of the group.
Articles 50 and 52 to 54 shall apply mutatis mutandis.
2. Where a participating insurance or reinsurance undertaking or an
insurance holding company so decides, and subject to the agreement
of the group supervisor, it may provide a single solvency and
financial condition report which shall comprise the following:
(a) the information at the level of the group which must be
disclosed in accordance with paragraph 1;
(b) the information for any of the subsidiaries within the group
which must be individually identifiable and disclosed in accordance
with Articles 50 and 52 to 54.
Before granting the agreement in accordance with the first
subparagraph, the group supervisor
shall consult and duly take into account any views and reservations
of the members of the college of supervisors referred to in Article
252.
3. Where the report referred to in paragraph 2 fails to include
information which the supervisory authority having authorised a
subsidiary within the group requires comparable undertakings to
provide, and where the omission is material, the supervisory
authority concerned shall have the power to require the subsidiary
concerned to disclose the necessary additional information.
3a. The Commission shall adopt implementing measures further
specifying the information which must be disclosed and the means by
which this is to be achieved as regards the single solvency and
financial condition report.
Those measures designed to amend non-essential elements of this
Directive by supplementing it shall be adopted in accordance with
the regulatory procedure with scrutiny referred to in Article
304(3).
Is the
Solvency and Financial Condition Report
(of Solvency ii) in line with the international standards?
INTERNATIONAL
ASSOCIATION OF INSURANCE SUPERVISORS (IAIS)
GUIDANCE PAPER ON ENTERPRISE RISK MANAGEMENT FOR CAPITAL ADEQUACY AND
SOLVENCY PURPOSES - OCTOBER 2007
Supervisors should require appropriate
information on risk management and risk and solvency
assessments from each insurer they regulate.
This not only provides supervisors
with a long-term assessment of capital adequacy to aid in their
assessment of insurers, but encourages insurers to use risk management
effectively.
This could also be achieved by, for instance, a supervisor requiring
or encouraging insurers to provide a
solvency
and financial condition report.
Such a report could include a description
of the relevant material categories of risk that the insurer faces,
its overall financial resource needs, its economic capital and
regulatory capital requirements, and projections of how such factors
will develop in future.
Where an insurer fails to report adequate
information about its risk management practices, processes and
procedures from which the supervisor can monitor the insurer, the
supervisor should intervene or apply penalties
appropriately.
In addition, an insurer should have a duty to report to the supervisor
a breach in regulatory requirements as soon as it occurs.
Any requirements for public
disclosure of information on risk management, including possible
disclosure of elements of a solvency and financial condition report,
should be carefully considered by supervisors taking into account the
proprietary nature of the information,
whether it is commercially sensitive and
the potential for its publication to have
adverse effects on insurers, distort competition or give some
insurers an unfair advantage.
On the other hand, requiring insurers
to disclose sufficient financial information would enhance market
discipline and market confidence in insurers.
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(EU), European Economic Area (EEA) & Non-EEA Countries, including the
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Tel:
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Email:
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Solvency Capital Requirement
According to the Solvency ii Directive, The Solvency Capital
Requirement reflects a level of eligible own funds that enables
insurance and reinsurance undertakings to absorb significant losses
and that gives reasonable assurance to policyholders and
beneficiaries that payments will be made as they fall due.
www.solvency-capital-requirement.com
Minimum Capital Requirement
According to the Solvency ii Directive, when the amount of eligible
basic own funds falls below the Minimum Capital Requirement, the
authorisation of insurance and reinsurance undertakings should be
withdrawn, if those undertakings are unable to re-establish the
amount of eligible basic own funds at the level of the Minimum
Capital Requirement within a short period of time.
www.minimum-capital-requirement.com
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