Solvency II Data Management Handbook

SOLVENCY II
DATA
MANAGEMENT
Handbook
2015Sponsored by

Welcome to the latest in A-Team Group’s series of
Handbooks, which we hope are helping to shed light on
some of the trickiest issues that financial institutions are
having to grapple with today.
Far from being ‘just a European insurance issue’, the
Solvency II regulation has far-reaching implications into
asset management and custodian firms globally, the reasons
for which will become apparent as you read through this
Handbook.
Solvency II’s aim of creating a unified and stable industry
driven by risk management and solvency requirements to
help protect consumers and make the European insurance
market more competitive, is a noble one. But it has created
significant burden on data management practices across
financial institutions who are now wrestling with wide-ranging
requirements - many in last-minute mode - in order to comply
with the fast approaching deadline of January 2016.
In this Handbook we look at the regulation at-a-glance,
what the implications are of each of the three pillars on data
management, how Solvency II impacts data management at
insurance firms, asset managers and securities administrators
or custodians. We also delve into data issues, such as the
volume of data required, new data types, quality of data,
data governance and the significant requirement for data
transparency and fund look-through. And we explore the
downstream data challenges on infrastructure and reporting.
Finally, we give our take on the outlook for Solvency II.
Thanks to our sponsors Thomson Reuters and advertisers for
making this Handbook possible. If you enjoy this handbook
you may also want to register for our upcoming webinars
on Solvency II where we seek up-to-date information on the
state of the financial industry’s preparedness for the deadline.
We have one on May 28th and will have more later in the
year (register at bit.ly/rdr webinars). We’ll also be discussing
the impact of Solvency II and other regulations at our next set
of Data Management Summits in the second half of the year
in London and New York so be sure to come along. See you
there!
Angela Wilbraham
Chief Executive Officer
A-Team Group
Solvency II:
Time is Running Out
Managing Editor
Andrew P. Delaney
andrew@a-teamgroup.com
Contributing Editor
Sarah Underwood
sarah.underwood@a-teamgroup.com
A-Team Group
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SOLVENCY II
DATA
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Handbook
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Solvency II Data Management
5
Introduction 3
Foreword 7
Overview 8
Pillar-by-Pillar Overview 10
Data Management Impact 12
Data Issues 16
Downstream Data Challenges 22
The Outlook for Solvency II 26
CONTENTS
Unlocking the potential.
Data breadth and depth for
Solvency II compliance
SFI’s Solvency II service provides the cross-asset
class reference pricing data required to help
insurers, asset managers and custodians calcu-
late capital adequacy and reporting disclosures.
SIX Financial Information’s service provides the
data consistency and provenance required to sup-
port accuracy, completeness appropriateness.
Our compliance data service includes granular
asset data required for Solvency II including new
elements such as CIC, LEI and NACE industrial
classifications. The service is available in three
scalable service options to provide flexibility of
data and delivery formats.
www.six-financial-information.com/compliance

7
by Tim Lind, Global Head of Regulatory Solutions, Thomson Reuters
With its January 2016 deadline looming, Solvency II is becoming one of the more
demanding regulatory challenges of 2015. To comply, insurance companies need access
to valuations information and associated reference data required to understand the
current value of their investments. Many are looking to their investment managers for that
information, and there may be good reasons for that.
First, it appears that some insurers are considering dropping asset managers who are
unwilling to provide timely look-through and other information they need to comply
with Solvency II. More widely, this situation is leading insurers to question the benefits
of diversification and having multiple asset managers vs. the cost and complexity of
aggregating information from all of those asset managers for Solvency II.
For those asset managers that have adopted a robust approach to Solvency II’s data
requirements, the regulation represents an opportunity: By preparing to meet the look-
through needs of their insurance company customers, they can demonstrate added value
and win business away from those that haven’t prepared, particularly as insurers seek to
reduce the population of asset managers they use.
Meanwhile, asset managers facing these Solvency II-related pressures are considering
changing their asset allocation strategy because of the difficulty on meeting certain
look through requirements, particularly as they relate to the underlying components of
structured assets.
As they consider their options, savvy asset managers are partnering with providers of
comprehensive pricing and valuations data, and related reference data, like Thomson
Reuters. High on their check-lists are the breadth of coverage needed to service their
portfolios, expertise and availability of service staff, transparency of valuations process
and the range of associated identifiers and other meta-data that maps to the investments
in question. Ensuring this level of service is one sure-fire route to compliance. But
whichever route you take, now is the time to act: time is running out.
Foreword
As a marketing or business manager, you know you need content
marketing if you’re going to succeed in attracting and engaging
with today’s more savvy buyer. But do you:
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8
Thomson Reuters provides the industry with the leading range of
Solvency II and ORSA services; offering a specialist set of Pricing
and Reference Data Feeds, Tax and Accounting Consultancy
Services and Risk Models. Our feeds alone provide the market
with a complete set of ‘fund look-through’, ratings (credit quality
steps), benchmarks curves in addition to vital valuations
content. If you would like to learn more about our regulatory data
feed services, simply visit www.prdcommunity.com today.
www.prdcommunity.com
Overview (cont.)Overview
source data for compliance purposes from both internal
and external sources, often consolidating data from many
data vendors to generate required data sets and always
seeking to input consistent data across the three pillars of
the regulation.
As the implementation of Solvency II approaches, EIOPA
issues guidance on outstanding technical issues, and plans
are put in place for a final dry run of the regulation later
this year, insurers, asset managers and asset servicers need
to ensure the efficacy and completeness of their Solvency
II compliance programmes.
Solvency II is a European Union (EU) directive that aims
to harmonise European insurance regulation to create a
unified and stable industry driven by risk management
and solvency requirements, and designed to protect
consumers, improve regulatory supervision and increase
the competitiveness of European insurers in international
markets.
Insurers have until January 1, 2016 to achieve compliance
with Solvency II, but overcoming the many challenges of
the regulation could also bring opportunities in terms of
reduced capital requirements, improved risk management,
a clearer link between risk and capital to support business
decisions and a sturdy compliance platform.
The directive is principles based, complex and broad in
scope, covering not only insurers and reinsurers, but also
asset managers and third-party asset servicers. It is broken
down into three pillars:
• Pillar I – Capital requirements, including a solvency
capital requirement based on an internal or standard
model and a minimum capital requirement
• Pillar II – Governance and supervision, including
effective risk management and an internal Own Risk
and Solvency Assessment
• Pillar III – Public disclosure and regulatory reporting on
a quarterly and annual basis
While insurers bear the greatest burden of data
management under Solvency II and must manage both
existing data and new data, the burden carried by asset
managers and asset servicers is also significant. Under the
regulation’s ‘look-through’ component, asset managers
and asset servicers must provide transparency on the
investments they hold on behalf of insurance company
clients in accordance with technical standards outlined
by the European Insurance and Occupational Pensions
Authority (EIOPA). The standards, which cover both
asset data and risk management data, include quality
requirements of complete, accurate and appropriate data.
Asset managers and servicers must also provide more
granular information on entities issuing securities and
the component elements of derivative instruments. It
is expected that some asset managers will divest asset
classes that do not have the underlying performance
data required by Solvency II and instruments that create
a large capital charge and are perceived by insurers as
disadvantageous in terms of solvency capital requirements.
With data management requirements running through the
principles and pillars of Solvency II, insurers are likely to
9
Significant
Milestones
November 10, 2009:
Adoption by European
Council
March 14, 2014:
Omnibus II vote revises
the Solvency II directive
October 31, 2014:
EIOPA submission to the
European Commission
of Set 1 of the
Implementing Technical
Standards for Solvency II
January 31, 2015:
Deadline for transposing
Solvency II rules into
national law
February 2015: EIOPA
publication of Set 1
of the Guidelines for
Solvency II
At a Glance
Regulation: Solvency II
Regulatory Regime/
Authority: European
Union European
Insurance and
Occupational Pensions
Authority (EIOPA)
Target Market Segment:
Insurance companies and
their service providers
Core Data
Requirements:
Transparency of risk
exposure
Dates for Diary
June 30, 2015: EIOPA
submission to the
European Commission
of Set 2 of the
Implementing Technical
Standards for Solvency II
July 2015: EIOPA
publication of Set 2
of the Guidelines for
Solvency II
January 1, 2016:
Implementation of
Solvency II
Key Links
Overview:
http://ec.europa.eu/
finance/insurance/
solvency/solvency2/
index_en.htm
Timeline:
https://eiopa.europa.eu/
regulation-supervision/
insurance/solvency-ii
Technical Specifications:
https://eiopa.europa.eu/
regulation-supervision/
insurance/solvency-ii-
technical-specifications
Further Information
To find out more about regulations in financial markets,
take a look at the A-Team Group Regulatory Data
Handbook: http://bit.ly/regulatoryhandbookedition2

Pillar-by-Pillar Overview (cont.)Pillar-by-Pillar Overview
The three pillars at the core of Solvency II describe the
regulatory requirement for insurance companies, in some
cases in terms of regulatory reporting and in others of
verifiable processes.
Pillar I describes the valuation of assets for capital
requirement calculations. It requires insurance companies
to have access to highly granular pricing and valuations
data, as well as terms and conditions, curves and
spreads, for use in the regulation’s Solvency Capital
Requirement (SCR) and Minimum Capital Requirement
(MCR) calculations, as well as credit ratings, classifications,
security identifiers, and other meta data underpinning
those data sets. Pillar I’s Market Risk Module (MRM)
requires insurers to assign all assets held to one of seven
specific risk categories:
• Equities
• Interest Rates
• Property
• Spread
• Counterpart Default
• Currency
• Concentration
Pillar II describes the requirement for governance and
supervision. It requires the creation of a governance
structure that supports Solvency II’s so-called Own Risk
Solvency Assessment (ORSA) obligation. Under Pillar II,
insurers are required to stress-test their balance sheets
using risk systems and many of the same data sets that are
used for Pillar I all underpinned with robust governance
processes and models.
Pillar III describes the requirement for reporting and the
need for a detailed repository of internal data. To meet
this pillar’s requirements, insurers will need access to the
CICs (Complementary Identification Codes) and NACE
(Nomenclature Statistique des Activites Economiques
dans la Communaute Europeene) non-standard instrument
classification codes, as well as the Legal Entity Identifier
(LEI) standard identifier, to complete the regulation’s
Quantitative Reporting Template (QRT).
Overall, the three pillars require large amounts of highly
granular data. One large insurer suggested his company’s
efforts to date had generated some 75,000 data points,
covering the sample data sets shown, among others.
10
Solvency II Data Management Solvency II Data Management
11
n Itemised list of assets
n Structured products
n Trade data
n Underlying security
n Acquisition price
n Synthetic
n Structured products
n Solvency II value
n Capital protection
n Quality/number of
contracts
n Collateral held
n Accrued interest
n Fixed annual return
n Accrued rent rating
agency
n Accrued dividend
portfolio
n ID code/type fund
number
n Issuer name/code/group
n Held in unit listed fund
n Counterparty name/
code/group
n Look-through
information
n CIC, LEI codes
n Variable annual return
n Issuer sector
n Off balance sheet items
n Asset category
n Securities lending and
repos
n Valuation method
n Derivatives
n Duration
n Prepaid structured
products
Sample Data points for Solvency II
Reporting
Solvency II represents a revolution in risk management for
insurers, asset managers and custodians. The new infrastructure
requirements impact all areas of their business and create
data quality and operational model challenges. SIX Financial
Information’s Solvency II service helps firms to process the
increased volumes of granular asset data needed to meet
the stringent risk management parameters. This ensures
data accuracy, completeness appropriateness for pillar one
calculations and to meet pillar three’s reporting obligations.
www.six-financial-information.com/
solvency-ii

Data Management Impact (cont.)Data Management Impact
While Solvency II has been designed to ensure that the
insurance industry has a comprehensive understanding of
the risks associated with its investments, the regulation’s
impact is far wider than on the insurance industry alone. It
also has a significant impact on the financial services firms
that service those insurance investments – specifically,
asset managers and asset servicing companies – due to
the fact that insurance companies are able to source only a
fraction of the required data sets themselves.
Insurance Firms
As reporting entities under Solvency II, the onus is
on insurance companies to provide the appropriate
information to populate the so-called Quantitative
Reporting Template (QRT) and other reporting templates.
At the core of the data requirement is valuation and risk
data, which means insurance companies need to source
pricing, credit ratings and other indicators of value and risk
of all the assets they hold. For illiquid securities, this may
involve evaluated pricing services and highly specialist data
sets, often sourced from the insurer’s asset managers or
third-party data services.
As well as sourcing the data itself, insurers will be required
to validate the origination, collection, cleansing and
normalisation of data sets. Furthermore, to meet specific
analytical requirements of certain Solvency II attributes –
such as the Market Risk Module (MRM) and the Solvency
Capital Requirement (SCR) calculation – they need access
to entity identifiers like the Legal Entity Identifier (LEI)
and new non-standard classification data sets including
CICs (Complementary Identification Codes) and NACE
(Nomenclature Statistique des Activites Economiques dans
la Communaute Europeene).
Finally, they need to be able to identify permissible
investments. Under Solvency II, insurers are precluded from
investing in listed firms owned 95% or more by a single
entity (a similar, but slightly different requirement from
Dodd Frank’s). Calculating this ownership can be tricky,
particularly where subsidiaries and affiliates are concerned.
Asset Managers
For asset managers, the onus is on providing their
insurance clients with the risk and valuations data they
require to comply with Solvency II. Under the regulation’s
so-called look-through provisions, insurers need access
to this information held by third parties (mostly asset
managers).
But the asset managers may have issues with simply
delivering this information on demand. First, where they
are using a third-party to value or derive the information,
the asset manager may not own the data in question. This
raises issues around redistribution rights and licensing, as
well as the cost of providing this information.
Second, many of the asset managers’ processes for valuing
assets are considered proprietary, whether or not they draw
upon third-party information sets. As such, many asset
managers are wary of providing unfettered access to the
risk and valuations data required by the insurers to comply
with Solvency II. As a result, some asset managers have not
been enthusiastic suppliers of Solvency II data, while others
have insisted upon robust non-disclosure agreements with
their clients (see section on Fund Look-Through).
12
13
The quantitative disclosure requirements for Solvency II are
prescriptive and far reaching, requiring extensive asset data including
new elements e.g. CIC, NACE industry classifications, Legal Entity
Identifiers and enhanced funds ‘look-through’ capabilities. To
support the reporting process, SIX Financial Information provides
cross-asset reference pricing data to ensure data consistency and
facilitate accurate market, concentration and liquidity risk calculations
by utilizing a vendor’s core data management expertise to connect
and maintain the critical data points.
www.six-financial-information.com/
solvency-ii

Data Management Impact (cont.)
Third-Party Fund Administrators
Asset servicing companies are another source of Solvency
II data for insurers as they handle administration of
insurance investments on behalf of asset managers. As part
of this process, asset services may find themselves with
access to asset managers’ valuations and risk information,
but may be restricted in their ability to disclose it.
Similarly, they may be called upon to provide the analytics
and valuations data asset managers require for their
insurance clients. As such, custodians and other asset
servicers are striving to understand the requirement
from the perspective of both the asset management and
insurance communities.
14
Pricing Reference Data
A comprehensive
approach to managing
the data and reporting
requirements for asset
managers and insurers
under Solvency II
Financial firms are seeking unprecedented
transparency and quality of data to manage
risk and maintain operational efficiency
in the face of increasing regulation and
globalization of the capital markets.
Interactive Data provides high-quality reference data on over
10 million financial instruments, and collects, edits maintains
and delivers pricing from more than 450 markets and
exchanges around the globe. The combination of high quality
reference and pricing data, coupled to proven analytics can
help firms successfully manage the transition to Solvency II
and maintain ongoing compliance.
To find out more:
E: info@interactivedata.com
W:www.interactivedata.com

Data Issues (cont.)Data Issues
Overview
The data requirement for Solvency II is substantial,
including existing and new data that is typically sourced
from both internal systems and external providers such as
data vendors, asset managers and asset servicers. Most
insurers will use data from a number of these sources,
implying a significant data aggregation challenge that
requires the collation of market, liquidity, credit and
operational data to measure and report on risk.
The volume of data from multiple sources also raises
concerns about the consistency of data, particularly in
relation to Pillar I capital requirement calculations and
Pillar III disclosure and reporting, while the need for very
granular data is particularly acute in the look-through
process that requires asset managers and asset servicers
to provide transparency on the investments they hold on
behalf of insurance company clients.
Solvency II also focuses on data quality, imposing data
standards that must be met, as well as ongoing assessment
processes designed to ensure that data quality is
sustained. In many cases, these requirements will result in
improved data quality that can benefit both the insurer’s
business and other regulatory reporting regimes. Hand in
hand with data quality and consistency is data governance,
the requirements of which are outlined, but not prescribed,
in Pillar II of the regulation.
While many large insurers will implement data
management programmes for Solvency II in house, some,
along with smaller insurers, will use vendor solutions to
achieve compliance with all, or particular elements, of the
regulation. These solutions include data vendor services
offering data sets required by insurance companies
to comply with the capital adequacy and disclosure
obligations of Solvency II. They also include fund data
utilities that are offered by solution vendors and designed
to provide a common platform that can be used by
insurers and asset managers to manage requests for asset
data that is needed for the look-through process that
forms part of Pillar I Solvency Capital Requirement (SCR)
calculations and Pillar III regulatory reporting.
New data types
Solvency II introduces new data requirements related
to coding conventions, classifications, credit ratings,
benchmark curves and default probability analytics, as
well as new data taxonomies for securities instruments.
While most of these data types are familiar to the financial
industry, the data classifications include two new schemes
that have not previously been used in the industry.
These include CICs (Complementary Identification Codes),
that are used for asset class and country classification,
and NACE (Nomenclature Statistique des Activités
Economiques dans la Communauoté Européenne) code
that are used for industry sector classification by the
European Commission. Bringing together and reconciling
this data can present a challenge for insurers as the data is
not always available and it is not standardised.
For example, while data vendors offer CIC codes, their
coverage does not extend to instruments that are traded
over the counter or bilaterally. This means insurers must
define codes to fill the gaps in vendor data without the
benefit of market standards, potentially leading to the
same instruments being coded and classified differently by
different insurers, a discrepancy that has yet to be resolved
by regulators. Similarly, questions about the materiality of
CIC codes remain unanswered.
While not entirely new, the emerging Legal Entity Identifier
(LEI) is also a requirement of Solvency II and should be
used where it is available in Pillar III regulatory reporting.
This will facilitate the exchange of information between
insurers and national supervisory authorities, as well as risk
analysis of submitted data by the authorities.
Companies have until 1 January 2016 to implement the Solvency
II regulatory requirements. This involves fulfilment of the interim
measures under the supervision of their national regulators
(NCAs) by Q2 2015, finalizing risk models, implementing Own
Risk Self Assessments (ORSA), and fulfilling Pillar 3 disclosure
requirements. SIX Financial Information provides the cross-asset
reference data necessary to ensure a smooth transition and
comply with the European Union’s Solvency II directive. www.six-financial-information.com/
solvency-ii
16
17

Data Issues (cont.)Data Issues (cont.)
Data quality
In many respects, the data quality requirements of
Solvency II are similar to those of other regulations and the
requirements of middle and back office functions. Where
they differ is in scale, with the depth and breadth of the
regulation requiring huge volumes of high-quality data that
can make data sourcing difficult and data management
burdensome.
The directive includes three criteria of data quality:
completeness, accuracy and appropriateness. It also call
for a means of assessing the three criteria with regard to
insurers’ data suppliers and internal systems.
The data content challenges of the Pillar 1 capital
requirement include the sourcing of high-quality, accurate
data ranging from basic terms and conditions and pricing
content to more complex datasets including curves and
spread data for use in Solvency Capital Requirement (SCR)
and Minimum Capital Requirement (MCR) calculations.
This can be a complex process as the information is
required at the underlying holdings level across potentially
multiple asset managers. Sourcing the data is even more
difficult where firms invest in complex funds and structures.
The nature of this data means it is likely be acquired from
multiple sources, including asset managers, vendors and
internal databases. This means it will require a strong data
management programme to ensure the level of quality
that is required to avoid over allocating capital.
There are a number of similarities between the data
challenges presented by Pillar I and the risk management
requirements of Pillar II, namely the acquisition of high-
quality, accurate, consistent data and the ability to
aggregate and report on this data in a timely manner.
Pillar I and Pillar III also have some common data
requirements, including granular cross-asset class
reference and pricing data. This data requires consistency
and provenance to ensure accuracy, completeness and
appropriateness for Pillar I SCR and MCR calculations, and
for the Pillar III Quantitative Reporting Template (QRT).
While all three pillars of Solvency II highlight the
importance of the application of quality data, the quality
assessment requirement within the governance principles
of Pillar II sets out to ensure continuous improvement in
data quality over time.
18
19
EIOPA data quality requirements
n Embed a system of data quality management across the entity
n Compile a directory of data attributes used in the internal model, stating each
attribute’s true source, characteristics and usage
n Define and monitor processes for identification, collection, transmission, processing
and retention of data
n Ensure data processing from source to model is transparent and demonstrable
n Define objective metrics for completeness, accuracy and appropriateness of data
n Establish a data policy which sets out the entity’s approach to managing data quality
n Perform periodic data quality assessments, and implement a process for identifying
and resolving data deficiencies
n Document instances where data quality may be compromised, including implications
and mitigating actions
n Provide an audit trail and rationale for data updates when applying expert judgment
in lieu of reliable internal or external data
n Agree with the role of internal and external auditors in assessing data quality
n Establish a process to manage changes or data updates which materially impact
model outputs
Interactive Data’s Solvency II data solution delivers unparalleled
breadth and depth of cross-asset data to help asset managers
and their insurance clients to successfully maintain ongoing
compliance in their reporting, and capital and risk management
functions. The solution includes high-quality asset data required
to support the Minimum Capital Requirement (MCR) and
Solvency Capital Requirement (SCR) calculation process under
pillar 1 requirements and additional asset data requirements
specific to Quantitative Reporting Templates (QRTs) under pillar 3. www.interactivedata.com

Data Issues (cont.)Data Issues (cont.)
Data Governance
Insurance companies, asset managers and asset services
alike recognise that Solvency II will require fundamental
governance changes to the way they source and manage
data. Whether supplying or receiving Solvency II data,
each of these practitioner organisations will be required to
be able to vouch for the accuracy, timeliness and overall
validity of the data they are using under Solvency II.
To that end, many firms have implemented or embarked
on projects to implement a wide-ranging governance
framework. According to one Solvency II specialist at
a major German insurance company, the regulation’s
stress on data quality prescribes a robust approach to
governance, complete with committees to uphold internal
standards and close relationships with asset managers.
This executive described his company’s Solvency II data
management and governance process in terms of four phases:
To handle the governance function, many insurance companies
have implemented a central standardisation and management
platform supported by the group IT function and servicing
stakeholders within the lines of business. This approach, they
expect, will ensure a more standardised, centralised and
comprehensive data set for use by the business with support
and controls put in place and managed by IT.
For asset servicers and asset managers, Solvency II requires
them to have the governance structure in place to prove they
understand the appropriateness and quality of the data they
provide to the insurance companies’ reporting systems. Part
of this requires transparency on the part of third-party data
providers, such as credit rating agencies, valuations providers
and other suppliers.
DataTransparency and Fund Look-Through
As discussed, most insurers are looking to their asset
managers for help in meeting Solvency II’s data
requirements. Under the regulation’s look-through
provision, they are expecting to access valuations and risk
data on their holdings from the various asset management
firms they use to look after their investments.
But getting access to this data isn’t as simple as it appears.
Insurers are finding it more difficult than they’d expected
to receive highly granular and timely fund holdings, risk
exposure and valuations data from their managers. This is
for two main reasons.
First, the asset managers themselves often use third-
party services – from other fund managers, to asset
servicers or data vendors – to run analytics on their
insurance company clients’ holdings. Since they don’t
own this data, they are unable to pass through access to it
without having appropriate licensing deals in place. Many
participants report that they are working on securing such
arrangements, but that they take time and money.
The second issue relates to the asset managers’ own
intellectual property. For many, risk and valuation analysis
represent proprietary services provided as part of their
broader asset management remit. As such, many asset
managers seem to be reluctant to simply pass through this
‘special sauce’, instead restricting access to certain data
sets or requiring extensive non-disclosure agreements to
be in place before access is granted.
Such is the level of intransigence that insurers are now said
to be exploring the possibility of reducing the number of
asset managers they use based on the managers’ ability
and willingness to supply them with Solvency II data sets
(see Outlook section).
20
21
Phase Data/Action
1 Data Capture/Management Direct holdings
Investment funds
Target funds
Market data vendors
2 Data Governance Apply CIC codes – standard or client-specific
Use proxies where look-through not available
Decomposition of structural derivatives
3 Analysis Solvency Capital Requirement
Other reports/calculations
4 Reporting Reporting via Quantitative Reporting Template

Downstream Data Challenges
Solvency II poses significant data challenges downstream
as it puts pressure on systems infrastructure, calls for new
reporting workflows and includes complex compliance
requirements. The challenges result from the scope of the
regulation, the volume and variety of data that must be
managed, aggregated and distributed, and tight deadlines
for reporting and compliance.
Reporting
Solvency II reporting is covered by Pillar III of the directive
and includes both public disclosure and regulatory reporting
on a quantitative and qualitative basis. The aim is to expose
risks faced by insurers and detail concomitant capital
adequacy and risk management programmes, as well as
to increase transparency of the industry for the benefit of
regulators and consumers. Some European countries have
already started Solvency II reporting, particularly among
large insurers, while others are working towards the January
2016 compliance deadline.
Two types of report are required under Pillar III, the
quantitative Quarterly Reporting Template (QRT) and
more narrative reports entitled the Solvency and Financial
Condition Report (SFCR), which insurers are required to
disclose publicly and submit to their the local national
competent authority (NCA) on an annual basis, and the
Regulatory Supervisory Report (RSR), which is a private
report to the local NCA and must be submitted in full at
least every three years and in summary every year.
Reporting using QRTs is the most taxing element of Pillar III.
Demand for data is large and includes look-through data,
the data must be extremely granular and of high quality, and
the reporting schedule requires both quarterly and annual
submissions to local supervisors that, in the case of annual
submissions, must be made within five weeks of year end.
Insurers will need an extensive data repository to meet
the reporting requirements of the regulation and will also
need to source new data, particularly CICs (Complementary
Identification Codes) that are used for asset class and
country classification, and NACE (Nomenclature Statistique
des Activités Economiques dans la Communauoté
Européenne) codes, that are used for industry sector
classification. The Legal Entity Identifier (LEI) is also a
requirement of reporting and all asset and risk data must
be mapped to the eXtensible Business Reporting Language
(XBRL) for submission to supervisors.
The European Insurance and Occupational Pensions
22
Conference Exhibition
Datesforthediary
Navigating the Regulatory Maze for Data Management
2015 www.referencedatareview.com
NEWYORK
NOVEMBER
3
LONDON
OCTOBER
1

Downstream Data Challenges (cont.)
Authority (EIOPA) has specified towards 100 QRTs that are
split into three sets covering supervisory reporting, public
disclosure and financial stability reporting. Completion of
different templates is specified for annual, quarterly, group,
solo, financial stability and ring-fenced fund reporting.
To support this EIOPA has published sets of Log files
containing specifications and instructions for completing
the templates, including definitions of data items and
standardised coding formats. It has also specified a number
of completion thresholds for some QRTs that limit the level
of detail required.
Infrastructure requirements
The breadth and depth of Solvency II requirements call for
a robust systems infrastructure that is ideally based around
a centralised data repository. As well as the ability to source
internal data, the infrastructure must include interfaces to
numerous data vendor feeds and the ability to aggregate
data across systems. It must also link to asset managers and
asset servicers that support the look-through element of
the regulation, and support workflows for solvency capital
requirement calculations, risk management and reporting.
Most large insurers are likely to leverage and extend
existing data management capabilities to deliver Solvency
II compliance, although some are mixing in-house
development with outsourced services and vendor solutions
that fulfil the look-through function and bridge the gap
between asset managers’ concerns about public disclosure
of investments to insurers and insurers’ regulatory reporting
obligations. Smaller insurers that must be Solvency II
compliant, but have not typically managed their own
data in the past, are developing and implementing new
data management strategies to meet the regulations’
requirements, but are expected to continue to rely on
outsourced or vendor solutions for operational purposes.
25
Solvency II
reporting
timeline for
UK insurers
By May 25, 2015:
Year end 2014 annual
solo reporting to the
Prudential Regulation
Authority (PRA)
By July 6, 2015: Year
end 2014 annual group
reporting to PRA
By November 16, 2015:
Third quarter 2015 solo
reporting to PRA
By January 1, 2016:
Third quarter 2015
quarterly group reporting
to PRA
January 1, 2016:
Implementation of
Solvency II
For news on further Hot Topic webinars as they are
added go to bit.ly/rdrwebinars
Reference Data Review
Your Reference Data Resource from A-Team Group
Forthcoming Webinars
If you would like to learn about webinar sponsorship and
speaking opportunities, please contact Caroline Statman at
caroline@a-teamgroup.com
April 28th Enterprise Data Management - The Next Generation
May 7th Pricing and Valuations Data
May 14th Screening for Sanctions, Watch Lists and PEPs
May 19th Data Governance
May 28th Solvency II
June 2nd Utility Model for Data Management
June 9th A Collaborative Approach to Client and Entity
Data for Client Onboarding
June 16th BCBS 239
July 9th Entity Data Management
July 14th Risk Data Analytics
bit.ly/rdrwebinars
Fulfilling Solvency II requirements inescapably entails collecting,
aggregating and reporting on vast amounts of data and analytics.
OTCFin’s core competencies lie in enterprise-wide risk data
management. Our multi-talented team will perform data and
analytics sourcing, enrichment and monitoring to produce fully
transparent reports in standard and customized formats, including
XBRL, Tripartite and Club AMPERE FundsXML. Leverage on our
expertise to accelerate time to market of your data framework
while reducing the overall cost of ownership. www.otcfin.com

The Outlook for Solvency II
Insurance companies interviewed for a recent A-Team
survey on the data management implications of Solvency
II were largely confident of their ability to meet the 2016
deadline.
They reported good results from dry runs they experienced
during 2014, with some having embarked on their
Solvency II initiatives as early as 2011. They believed that
the combination of impending (possibly final) guidance
from European Insurance and Occupational Pensions
Authority (EIOPA), publication of comments from an earlier
consultation, and a further dry run during the third quarter
of 2015 would clear up any remaining inconsistencies.
Firms are also beginning to acknowledge the potential
business benefits from implementing the data governance
and data management practices required by Solvency II.
For some, the work they have done for Solvency II merely
continues in a similar vein to that which they started under
Dodd Frank. For others, Solvency II compliance is a major
step toward meeting the data requirements for other
regulatory initiatives. Others see their Solvency II efforts as
validation of their general governance activities.
Insurance companies appear confident that the issues
around look-through can also be overcome. They report
good collaboration from data vendors on working with
the various stakeholders to ensure data sets are properly
licensed. As mentioned above, some believe there is an
opportunity to weed out intransigent or inflexible asset
managers that are reluctant to make valuations and other
data available to their clients.
For asset managers, adopting a flexible approach to data
licensing and making proprietary information available to
clients (albeit under non-disclosure agreements) may allow
them to differentiate their service offerings, with insurers
less willing to use asset managers that don’t play ball with
respect to Solvency II.
26

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