EFAMA KPMG Solvency II Report

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18 | SOLVENCY II REPORT 4 Working Group Findings Figure 4.1.1.b – Summary of data elements by representative sources 1 1 6 3 10 15 4 3 1 5 33 ■ Accounting ■ Client enhanced ■ Custodian ■ Performance Engine ■ Accounting Enhanced ■ Collateral manager ■ Derivatives Back Offi ce ■ Security Lending ■ Client ■ Contract Terms ■ Fund Manager Source: BNY Mellon Peter Luckhurst (peter.luckhurst@bnymellon.com Insurers will look to their asset service providers, whether the asset manager or their administrator, to support the asset data requirements. Identifying where within the asset servicer’s organisation a particular piece of data is held, ensuring quality and providing it to the insurer in an electronic format will require development effort. There are some finer points to the Solvency II data that fund administrators need to be aware of when establishing their asset data solutions. These include, but are not limited to, the following: •Valuation basis: this is required to be the Solvency II basis, i.e. fair value, which may differ from the current valuation basis and require fund administrators to re-engineer their systems/processes • Credit rating: the selection basis for which credit rating to utilise is likely to differ by insurer. In addition the credit rating within the entity’s QRTs must be the same as that used within the Pillar 1 SCR calculations • Derivative profi t and loss: the amount realised that is disclosed on closure of a derivative is required to be the profi t and loss since inception of the derivative A final observation on the impact of the granularity of the Solvency II asset data requirements is that the volume of data to be exchanged with the insurer is considerable. The security-by-security level of disclosure, the number of data points required and the need for transactional information on derivatives and security lending/repurchase agreements combine to represent a challenge in terms of delivery, format and security. Potential Solutions A key step in addressing the issue of granularity is for there to be an appropriate level of open and practicable communication between the insurer and their fund administrators. In particular: •The insurance industry, in collaboration with the fund administrators, need to defi ne a core/standardised set of data designed to meet the needs of the three Solvency II pillars • Fund administrators need to define the data points that are currently available and identify the gaps and any associated development efforts In addition, both asset managers and administrators need to recognise that the asset related data represents only part of the insurer’s overall data needs © 2012 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.
ISO 3166 - 1 - alpha -2 country code 4 WORKING GROUP FINDINGS | 19 4.1.2 Complementary Identifi cation Codes Requirements Complementary Identification Codes (CICs) are a four position code used to classify assets for Solvency II Pillar 3 reporting. The first two positions are used to classify the asset by country of listing using the ISO 3166-1-alpha-2 country code or XL/XT for assets that are not listed on the stock exchange and assets that are not traded respectively. The third position is used to categorise the assets into invested asset types, such as government bonds, corporate bonds, equity etc. The fourth, and fi nal, position is used further to categorise the assets into sub-risks for each of the types detailed in position three. Figure 4.1.2.a – Sample extract of the CIC guidelines First 2 positions Third position Fourth position Source: EIOPA Asset listed in Category 1 2 3 4 5 6 7 Government bonds Corporate bonds Equity Investment funds Structured notes Collateralised securities Cash and equivalents 1 1 1 1 1 1 1 General Common Common Equity funds Equity risk Equity risk Cash Government bonds bonds equity 2 2 2 2 2 2 2 Supra Convertible Equity of Debt funds Interest rate Interest rate Transferable national bonds real estate risk risk deposits bonds related corporation 3 3 3 3 3 3 3 Subcategory or main risk Regional government bonds Commercial paper Equity rights Money market funds Currency risk Currency risk Other deposits short term (less than one year) 4 4 4 4 4 4 4 Municipal Money Preferred Asset Credit risk Credit risk Other government market equity allocation deposits with bonds instruments funds term longer than one year 5 5 5 5 5 5 Treasury Hybrid bonds Real estate Real estate Real estate Cash bonds funds risk risk deposits to cedants © 2012 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.
Page 1 and 2: ADVISORY Solvency II Data Impacts o
Page 3 and 4: Contents CONTENTS | 5 1 Foreword 6
Page 5 and 6: 1 FOREWORD | 7 © 2012 KPMG LLP, a
Page 7 and 8: 2 EXECUTIVE SUMMARY | 9 Challenges
Page 9 and 10: 2 EXECUTIVE SUMMARY | 11 © 2012 KP
Page 11 and 12: 3 Introduction 3.1 Objectives and A
Page 13 and 14: 4 WORKING GROUP FINDINGS | 15 © 20
Page 15: Figure 4.1.1.a - Types of data requ
Page 19 and 20: 4 WORKING GROUP FINDINGS | 21 From
Page 21 and 22: 4 WORKING GROUP FINDINGS | 23 Chall
Page 23 and 24: 4.1.4 Ad-hoc Data Provision Require
Page 25 and 26: 4.2 Data Management 4.2.1 Data Deli
Page 27 and 28: 4.2.2 Data Exchange Formats 4 WORKI
Page 29 and 30: 4.2.3 Data Licensing 4 WORKING GROU
Page 31 and 32: 4.2.4 Data Governance 4 WORKING GRO
Page 33 and 34: 4 WORKING GROUP FINDINGS | 35 This
Page 35 and 36: 4.2.5 Data Quality 4 WORKING GROUP
Page 37 and 38: 4 WORKING GROUP FINDINGS | 39 Poten
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Page 41 and 42: 4 WORKING GROUP FINDINGS | 43 Corpo
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Page 45 and 46: 4 WORKING GROUP FINDINGS | 47 Insur
Page 47 and 48: 4.3.3 Asset Valuation 4 WORKING GRO
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Page 51 and 52: 4 WORKING GROUP FINDINGS | 53 discu
Page 53 and 54: 4.5 Other Regulations 4 WORKING GRO
Page 55 and 56: 4 WORKING GROUP FINDINGS | 57 © 20
Page 57 and 58: The main contributors from KPMG wer
Page 59 and 60: 6 GLOSSARY | 61 © 2012 KPMG LLP, a
Page 61 and 62: © 2012 KPMG LLP, a UK limited liab

EFAMA KPMG Solvency II Report

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