Outcome of themed inspection of Solvency II regulatory reporting by insurance firms released

• Review of insurance firms’ regulatory returns to assess compliance with Solvency II
• Some good practices identified but a number of areas require improvement
• Insurance firms have an obligation to provide accurate and complete information

The Central Bank has published (PDF 3.97MB) observations from analysis of data reported by insurance firms, and from thematic onsite inspections into the governance, controls and data quality around the regulatory reporting process. The purpose of this analysis was to assess if insurance firms had established a robust and documented process for Solvency II regulatory returns. This analysis took place after the first set of annual returns were submitted in 2017. 

It is essential that insurance firms have a robust regulatory reporting framework in place as all insurance firms have an obligation not to provide information to the Central Bank, which they know, or ought to know, is false or misleading. Solvency II regulatory returns are used to inform the Central Bank’s assessment of an insurance firm’s risk profile and financial position. 

The absence of a robust regulatory reporting process may lead to errors in an insurance firm’s data and reporting. This could affect the Central Bank’s assessment of a firm’s financial resilience, as errors may result in volatility of the Solvency Capital Requirements (SCR) of a firm.

The main findings of the analysis and inspections were:

• Some insurance firms have failed to meet the basic requirement of having a Supervisory Reporting policy in place.
• Some Boards are signing off returns without being presented with the full suite of annual QRTs.
• In some insurance firms there has been minimal oversight or active engagement, by the Risk, Compliance and Internal Audit functions of the QRT/NST regulatory reporting process.
• There is a lack of documentation of the end-to-end regulatory reporting process, including key controls.
• Insurance firms are not recording regulatory reporting errors consistently, increasing the likelihood that errors are being repeated

Sylvia Cronin, Director of Insurance Supervision, said: “Our review has shown that some firms are still developing and embedding their processes and controls around regulatory reporting. While we have seen improvements in the quality of submissions, resubmission rates are still unacceptably high.

“It is essential that firms have a robust regulatory reporting framework in place to ensure the validity of information submitted to the Central Bank. Responsibility for ensuring the accuracy of regulatory returns lies with the Board and Senior Management, particularly those directors who have attested to the accuracy of the returns via the directors’ accuracy certification.”

The Central Bank will follow up directly with those that have signed the accuracy certificates on instances where inaccuracies are evident.