by guest blogger – Matthew Grant, Executive Director of Abernite
In Part One, I covered the state of the insurance industry when it comes to handling data and why it is paramount to get it right to adhere to regulations. In this blog, I take you through the steps required to comply to Solvency II Pillar 3 Reporting, and outline the data needed, the penalties and how the industry can get ready for the 1st January deadline.
The following sections in the Solvency II Pillar 3 Annual Operating Instructions relate specifically to exposure data:
- ASR249: Movement of reported but not settled (RBNS) claims (page 37)
- ASR250: Loss distribution profile – non-life (page 38)
- ASR251: Underwriting Risks Non-Life (page 30)
- ASR252: Non-life distribution of underwriting risks – by sum insured (page 41)
Of these, potentially the most significant requirements for Delegated Authority business can be identified in ASR252. Most notable are the following critical elements that need to be recorded:
- The total by line of business and sum insured of each and every single underwriting risk, which have been accepted by the syndicate.
- The original deductible of the policyholder and the sum insured for each individual underwriting risk must be provided. Where there is no sum insured, defined in the policy, the managing agent should do their own estimations or use default values.
- A policy cover with multiple buildings must be broken down by individual building coverage.
- Premium for each risk.
Penalties for late and incorrect submissions
Lloyd’s is coming down hard on late submissions or those it considers incorrect. It states that “if an inaccurate or incomplete submission has been submitted then Lloyd’s may at its discretion regard that submission as being “late” in which case a fine may be imposed”. This is a flat fine of £5,000 per return per syndicate and an additional fine of £1,000 per working day the submission is late. Persistent delays will lead to further disciplinary action.
Getting ready for Pillar 3
There is still time to get ready for Solvency II Pillar 3 reporting and not risk incurring fines. Tools such as Intrali from VIPR are being used by many Lloyd’s managing agents to clean data effectively and efficiently.
VIPR’s solution offers a data quality audit to help an organisations understand where it needs to focus its efforts. Analyses are performed on a sample of a bordereaux to identify where problems exist and enable the organisation to create a plan to improve data cleansing and storage. A data audit and plan can be undertaken as follows:
Understand Data Requirements
- Understand the requirements of Solvency II and how these relate to the business being written
- Undertake a data audit to establish the quality of existing data and data sources
Define the Process
- Establish rules for checking the quality of data at each key step in the underwriting and portfolio management work flow
- Execute business rules and data quality enhancement by building them into the operational systems
- Measure and monitor the quality of data against what is expected and how it trends over time
- Identify where improvements are required and implement these
It will be a number of years before the Delegated Underwriting solution commissioned by Lloyd’s is fully operational, and even then the barriers to accessing good quality data will likely be impacted as much by market conditions as by technology. Until then, each Lloyd’s managing agent will need to dedicate time and senior resources in order to remain compliant with Pillar 3 requirements.
And finally, the news that European insurer Gable has elected to go into run-off because it couldn’t cope with the Solvency II requirements is a warning of the challenges ahead, which should not be ignored.
Matthew Grant has spent 25 years building a global modelling business before launching Abernite in early 2016. Abernite offer experienced professionals to support fast growing companies providing data and analytics to the insurance industry.