With the announcement that the UK will not implement EIOPA taxonomy 2.7.0 for Solvency II reporting, what direction will the PRA take to support UK firms in their reporting, beyond taxonomy 2.6.0?
In August 2022, the PRA announced that UK insurance firms should not adopt EIOPA taxonomy 2.7.0 and the taxonomies following, and should instead continue to use version 2.6.0.
For UK entities, all filing types - including third-country branches outside the UK with operations within it - will have to engage with taxonomy 2.6.0, instead of aligning with the wider issuer framework, or group framework.
Until recently, information has been scarce regarding how the PRA will manage the UK’s divergence from EIOPA taxonomy version 2.7.0. But, at the start of November, their Consultation Paper 14/22 on phase two of the Solvency II review reforms was published, and provides much more information on the scope and direction of the reporting framework for Solvency II in the UK.
The PRA has expressed the aim to “lower the reporting burden for firms and enhance the efficiency of supervisory oversight, without affecting the PRA’s ability to monitor risks to its objectives.”
What is the PRA's approach?
To this end, the PRA envisions taking a direction which builds on the foundations EIOPA has laid over the past ten years. Much of this will be evident in the deletion of templates, and in the reconsideration of the thresholds and reporting frequencies for certain reports.
The PRA also considers that the changes are in alignment with the authority’s objective of protecting policyholders and ensuring the soundness of PRA-authorised firms.
The consultation period closes in early May 2023, with the changes coming into effect as a framework at the end of 2024, and into 2025. This lengthy timeframe indicates that the PRA are taking a cautionary approach, allowing plenty of time to ensure that all the adaptations will meet the needs of the UK issuers and market; which is, of course, their ultimate goal.
Next steps
Invoke is supporting UK clients in navigating the changes to their Solvency II reporting, by making adaptations to our solutions where needed.
For our X-FAS solution, adjustments will be made regarding scenarios, allowing issuers to use 2.6.0 beyond the end of this year, as well as to dedicated volumes, event manager considerations, and an import folder which is dedicated to the version 2.6.0.
If you would like to discuss your reporting requirements, don’t hesitate to contact us.
