Articles - How do you look at your regulatory reporting

A dead weight or an opportunity to be exploited? Many are not asking the question. I have always thought of February as a month of new beginnings. It’s also the best time to ditch impossible New Year’s resolutions with a sigh of relief. On the financial reporting front, it’s a busy month. So you might want to spare a thought for those going through their first annual Solvency II reporting cycle. A lot has been said about Solvency II reporting, but to me one big question remains: what are we going to do with all the data?

 By Kareline Daguer, Insurance Pudential Directot at PwC
 Solvency II requires a dizzying quantity of reporting, made up of both public and private sets of templates and disclosures.
 There are 85 different templates codified in the EU package (not all templates apply to all insurers) with 11 more required by the PRA for good measure. A couple of months ago we published a sizeable guide through this reporting nightmare that took two years to complete. Publication felt so momentous that we baked a cake in the shape of the massive book to celebrate – possibly the tastiest thing to come out of Solvency II reporting.
 Over the last two months, I’ve spoken with a wide range of insurers about their regulatory reporting. So far the majority seem to be focusing on ‘getting over the line’, which means submitting the report just in time, applying the bear minimum of effort to avoid embarrassment and forgetting about it. But when looking closely at the data two things spring to mind: first, a good chunk will be publicly available by the end of May; second, the rest will be fed through the regulatory intestinal tract – this is known to be so long that nobody has ever discovered where it ends.
 The incentives to put some effort into the first category should be self-evident - it does not look good to put cryptic gibberish in the public domain. Regulators, analysts, investors and the general public rely on and use this information and they should not be let down by lack of enthusiasm among insurers’ reporting staff.
 Incentives in getting the second category right are more difficult to find, but in this type of dilemma my mum’s wise words always spring to mind: ‘If you are going to do it, do it right’. There is no escaping these requirements and in my experience it is never good to aim for mediocrity. I’ll elaborate: the information being reported under Solvency II has the potential to aid insurers’ commercial and strategic decision making. The insurance industry can be passive and do the minimum or it could get together and embrace the requirement to make it work to their benefit.
 All this information is reported in the same language (eXtensible Business Reporting Language – XBRL) and all insurers across the EU are reporting the same information. Where some might see reams and reams of pointless paper, I see the potential for more insightful decisions and better estimates. For example, the information on premiums and claims by line of business and claims triangles are good targets to exploit to explore underwriting performance on a very detailed level. So to go back to the first question - what are we going to do with all this Solvency II reporting? The opportunity is there and the only enemy is apathy and lack of curiosity.
 So, what’s needed to make the most of Solvency II reporting? The will and ingenuity of the industry to come together and agree to aggregate the information. The technology to make it happen is available, and I believe most insurers would love to understand how they compare against their peers in so many different metrics. As the data flows in and accumulates, insurers and their actuaries could have access to a treasure trove of information that can be sliced and diced in countless ways to help them make the best possible decisions in uncertain times.

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