Luxembourg: Destination: Solvency II

Last Updated: 28 November 2016
Article by Martin Reinhard
Most Read Contributor in Luxembourg, September 2019

It has been almost a year since the entry into force of Solvency II (SII), and the reporting efforts of (re)insurance undertakings and asset managers are finally converging towards business as usual.


In fact, we're not quite ready to say so yet. Here are some reasons why we think that Solvency II reporting's wandering journey isn't quite over yet.

The blurred vision of the look-through approach

The application and reach of the look-through provision are extensive, with (re)-insurance undertakings (IUs) being required to gather exhaustive asset-level information on their positions in collective investment undertakings to determine solvency capital requirement (SCR) figures reliably.

Recent monitoring exercises done to verify the degree to which the look-through (L-T) principle is applied suggest that many IUs are not able to reach a significant coverage of their investments via the L-T. Moreover, even when the principle is applied, there is no homogeneous indication that the L-T is used as well on deeper layers of investments (e.g. funds of funds, derivatives), as is advised by the Regulation. But what's holding IUs back from achieving complete look-through? The answer is a lack of the quality of the data retrieved from asset managers: information gaps, inaccuracies (e.g. CIC, LEI information) and heterogeneity of the data—amongst other things.

Validation controls tightening up

Transparency and quality of investment information are key topics in SII. Information errors translate into higher capital charges and operational costs for (re)insurance undertakings. Consequently, investment funds that fail to provide look-through information on their holdings or don't do so with a sufficient level of granularity and quality will face a severe competitive gap within the SII environment.

Previous reporting rounds have been characterised by supervisory authorities taking a slackened approach towards the validation controls applied to input data sourced from IUs, so as to smoothen the transit of data for the early reports. Along with the ongoing normalisation of the reporting processes, it is expected that validation controls will be tightened up, meaning more responsibility for IUs and, in turn, on asset managers as the prime source of the investment information.

Full speed ahead towards annual reporting

The scope and breadth of annual reporting is palpably larger than quarterly reporting, demanding additional Quantitative Reporting Templates (QRT) and new narrative reports (Solvency and Financial Condition Report and Regular Supervisory Report). Although the preparation of QRTs should not come as a novelty for most IUs, the workload needed to prepare a higher number of templates and comply with the greater level of detail should not be underestimated. This is true especially for those IUs which were exempt from quarterly reporting obligations and will now have to gather detailed item-by-item information to produce the look-through and other asset templates for the first time.

Annual reporting also means that IUs must disclose sensitive company information to the public through the Solvency and Financial Condition Report (SFCR). Given the nature of such information, we foresee that IUs will consider this reporting requirement to be beyond a mere compliance exercise. Feeble reporting performances would convey a misleading message to the ultimate audience of the report, including shareholders, regulators, and competitors.

External audit of Solvency II reporting: a costly dilemma

Although in most member states the opinion of the supervisory authority has been to require external auditing of at least the core elements of SFCR and/or annual QRTs, in other cases the relevant authorities have decided to opt out. Arguably, the practice of external auditing would bring advantages in terms of faithfulness and comparability of the reports, though at the price of raising the costs borne by the industry. Accordingly, the appeal for external audit may have repercussions over the whole reporting process, meaning stricter data quality requirements for asset managers' feeds and further cost opportunity considerations.

Can't rest easy... yet

Both regulatory and industry forces will drive toward some (expectedly) remarkable changes in the approach to Solvency II reporting. In 2017 EIOPA will be expected to re-discuss the methods and assumptions applying to the look-through approach over investments through collective investment undertaking, shedding light on a topic where a lack of specific regulatory indications have left many open questions for IUs and asset managers. The advice will also contain references to the application of risk mitigation technique criteria and to methods for setting up a standardised approach to deriving alternative credit assessments (i.e. avoidance of reliance on external credit ratings). On the other hand, the standardised asset data reporting template (the Tripartite Template, or TPT, promoted by the European Working Group to foster the exchange of SII information from asset managers) is expected to undergo a revision by Q2 2017, covering the latest field taxonomy and regulatory updates (e.g. incorporation of infrastructure investments).

Strategic positioning within Solvency II environment

For IUs, Solvency II calls for an increased awareness of and attention to investment practices. It means introducing additional elements to the traditional value-drivers to assess the convenience of existing and prospective investment decisions. In an environment of low yields and risk-appetite constraints, the presence of embedded capital costs and operational inefficiencies will become even more an element of discrimination within the asset selection process.

Asset managers will have to choose their strategic positioning within this new environment. Whereas non-compliance may represent a deal breaker for IUs targeting full look-through, the level of reach, quality, and consistency of SII information represents a remarkable means to remain competitive and to promote new client mandates.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions