The European Insurance and Occupational Pensions Authority (EIOPA) published a Consultation Paper
on the revised Guidelines on reporting and public disclosure. The proposals aim to keep the Guidelines fit for purpose while further enhancing proportionality and limiting administrative burden in the Solvency II reporting and disclosure framework.
In this consultation, BETTER FINANCE responded to the question regarding e Guideline 6 - Assets –
Information on aggregation by class. In our responses, we noted that BETTER FINANCE is concerned with the removal of Guideline 6 "Assets - Information on aggregation by class". Indeed, we disagree with EIOPA that Article 296, paragraph 1 of Delegated Regulation (EU) 2015/35 is sufficiently clear regarding the aggregation of assets into asset classes: while the Delegated Regulation requires insurance undertakings to disclose certain information "for each material class of assets", it does not specify how undertakings are to determine what is a "material class". The current Guideline 6 filled that blank with a reference to the Solvency balance sheet template, stating a clear supervisory expectation that the SFCR reporting would follow, for the section "D1. Assets", the classes defined in the balance sheet template.
This is particularly important as regards insurance undertakings' investments in investment funds: these are too often reported as one asset class, which is, of course, improper as investment funds are not a class of assets but a type of vehicle enabling insurers to invest in multiple classes of assets. What matters, then, is to have a look-through view to the asset classes in which insurers invest through collective investment undertakings.
Even though the balance sheet template has its shortcomings, notably in relation to the look-through approach for undertakings' investments in collective investment undertakings, these are well identified by EIOPA and we know potential solutions are already identified to ensure transparency on insurers' investments made through investment funds. Having the Solvency II guidelines on reporting and public disclosures refer to that template enabled any improvements made to the balance sheet template to directly translate into enhancements of the SFCR reports.
We then stress the need to ensure that the Solvency II rulebook still includes a clear requirement for insurance undertakings to report data on the assets they hold through funds. We would prefer this requirement to be clearly inserted in the Delegated Regulation; but in the absence of such a legally binding requirement and no plan to review the Delegated Regulation in the near future, we argue that Guideline 6 should not be deleted but amended in the sense of more clarity, with the inclusion of an explicit indication that the aggregation by class shall enable looking through investments in funds.
**Download The Response**