The Solvency II Directive came into effect on 1 January 2016, setting new capital requirements based mostly on the risks embedded on the asset side of balance sheets. This, in turn, implied the need for a look-though process of the investment funds held in insurance companies' portfolios. Indeed, the Quantitative Report Template (QRT) and Solvency Capital Requirements (SCRs) are now forcing insurers to process and report data with a high level of detail and granularity, in order to obtain an accurate view of the risks. Not applying a look-through principle for investments leads to a penalty, an "equity charge" of 49% for insurers under Solvency II (instead of 10-15% depending on the investment).
As a direct consequence of this regulation and this look-though principle, asset management companies have a key role to play by being the main actor in providing detailed and relevant data to insurers, so figures can be computed and reported accurately for regulatory purposes.
Many investment management associations have managed to identify a consolidated, harmonised, and structured approach to delivering the relevant data to insurers, and to create it—which means that the new reporting challenge they face is to build this market standard in the most efficient way and in the short amount of time left.
Solvency II reporting... dreary necessity or competitive edge?
For asset managers, the main objective of reporting is to facilitate insurance companies' computational efforts to compile information related to Pillar I – SCR driving. However, asset managers can use this "not mandatory" reporting to give themselves a competitive edge by implementing calculation modules that provide their insurer clients with handy indicators of capital requirements.
Delivering efficiently requested key information is a great opportunity for asset managers to offer insurance companies more competitive and customised services by both supporting them in their reporting process and offering them more suitable investment solutions that minimise capital requirements.
How can KPMG help?
We can take over any and every step of the reporting process, from helping you with the first client contact, to data-crunching and risk-figure-calculation, to the final dissemination of the reports to your investors. We can deliver not only the most up-to-date market standard Tripartite template, but also custom reports for your clients as well as Solvency II factsheets highlighting the key SCR figures that support your clients' investment decision processes.
Meet us at the European Risk Management Conference on 26 May 2016 at the Chamber of Commerce in Luxembourg to chat further! And in the meantime please have a look at our flyer for more details.
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