Solvency II Pillar III reporting : a market, audit and regulatory perspective

Abstract

Purpose: The objective of this study is to identify the benefits and challenges Solvency II Pillar III reporting has brought upon implementation to the local solo undertakings. It also evaluates the current position of the data requirements, assurance and regulatory review on the insurance companies as per the Directive. Design: Research objectives were achieved through the analysis of the local insurance market, eligible auditors and the regulator. Semi-structured interviews were held with multiple participants ranging in their proficiency for better diversification in professional judgement. Findings: The findings have highlighted the main benefits and challenges participants have encountered during the course of the implementation. It also covered the burdens small undertakings are experiencing because of the hefty deadlines and excessive costs which put more emphasis on the proportionality principle. Moreover, the requirements for better-automated systems, benefits and challenges of the SFCR audit and an overview of the supervisory review were discussed. Conclusions: Research concluded that undertakings have to improve the automated process for better data quality. However, it has improved the level of regulation which resulted in better market discipline. Yet, there is still room for improvement as it is still in its early stages, hence, it is ideal that all stakeholders have a common objective in order to achieve good transparent public and supervisory reporting. Value: The study’s aim is to provide recommendations on enhancements in the compliance with Solvency II. Taking the necessary steps for improvement will result into long-term betterment for the organisation and reap more benefits from the regulation. Some recommendations, but not limited to, include more involvement of the board in the preparation of the reporting, better documentation of guidelines and assumptions, exclusions for captives, more automated processes and more public awareness on the SFCR.