12 Mar 2014
| Par

Pillar 3 of Solvency II has long been considered the 'forgotten child' of the Directive, paling in perceived importance compared with Pillars 1 and 2. It is only since the publication of the Interim Guidelines by EIOPA on 27 June 2013 that the wider insurance industry has really begun taking the issue seriously.

  • Insurance
  • Insurance regulatory reporting
  • FAS Regulatory S2
  • e-Filing Insurance
  • Solvency 2

Conventional wisdom holds that an early-start is always the best approach in any project but where regulatory change is concerned, it is the right timing that is a crucial success factor. The delay in Solvency II has to a certain extent been salutary in allowing the market for reporting technology to mature in line with the growing clarity around the data requirements.

Facing unprecedented data requirements

While some of the insurance industry's larger players took an early-adopter approach to Pillar 3, starting up projects a few year ago only to have them brought to a standstill, many of these firms are now finding themselves in the uncomfortable position of having to revisit their disclosure and technology strategies, as previously accepted hypotheses are proving to no longer be true.

Firms that managed to stave off committing to a technology decision are actually today in the comparatively enviable position of having a wider range of options available to them. But that doesn't mean that they should be complacent.

The reality is that the Pillar 3 data-requirements are unprecedented in their scope and granularity, and many firms are finding that there are extensive gaps in their current capability to readily supply the requisite level of data against the timelines imposed by EIOPA, both for the Interim Guidelines and the full-blown implementation of Solvency II in 2016. And that is without even factoring XBRL into the equation.

Agility: the key to any future-proof strategy for Pillar 3 reporting

The good news is that the regulatory situation has stabilized sufficiently for there to be clarity for firms keen to move forward with their Pillar 3 implementation strategy, but there are a still number of variables that must remain at the forefront of any decision-making process. The Interim Guidelines only cover a subset of the complete range of QRTs, and firms need to arm themselves to meet this first-round of reporting in 2015 (2014 in France) while having the assurance that the effort and investment made in this regard will also serve as part of their overall programme implementation for 2016.

For firms looking to succeed in deploying a sustainable, future-proof strategy for Pillar 3 reporting in XBRL, agility must be the watchword that conditions every decision.

Data-requirements are likely to evolve; the XBRL taxonomies published by EIOPA will most certainly be subject to a significant number of iterations over both the short and the longer-term; and firms' internal systems will undoubtedly endure a period of flux before they stabilize and fully tick the 'Solvency-II ready' box.

Agile, standard and taxonomy-driven reporting technology that offers flexible data-capture is the keystone of Pillar 3 success.

XBRL is a complicating factor for many firms and the complexity of this unfamiliar data format should not be underestimated. It is vital that firms educate themselves sufficiently to be able to ask the right questions in order to properly evaluate and distinguish between technology alternatives, as all are not equal in their fitness-for-purpose.

Offering industry and regulator-endorsed applications that are natively XBRL, Invoke is at the forefront of the move to standardized reporting in the European financial services sector. Associating cutting-edge technology with extensive in-house regulatory domain expertise, Invoke brings a comprehensive 'solution' to the Pillar 3 conundrum. Focusing on building enduring client relationships based on pragmatism, trust and mutual understanding, Invoke is perfectly positioned to accompany Europe's insurance sector in meeting their Pillar 3 reporting obligations confidently and sustainably.