The European Insurance and Occupational Pensions Authority (EIOPA) has published a Note entitled “Need for high quality public disclosure: Solvency II’s report on solvency and financial condition and the potential role of external audit”. The purpose of this Note is to stress the importance of high quality public information and the relevant use of external audit services in relation to Solvency II public disclosures.
In the Note EIOPA points out that public disclosure under Solvency II can be considered as a paradigm shift in communication between (re)insurance companies and their stakeholders. It provides consumers, and all other stakeholders, with the opportunity to receive consistent and comparable information on the solvency and financial condition of those companies.
EIOPA believes that external audit can be a powerful tool in order to ensure high quality of public information, also in the context of Solvency II.
To foster transparency as one of the Solvency II cornerstones, EIOPA and its members will be very attentive to the actual application and the quality of public disclosure by (re)insurance undertakings.
EIOPA will be evaluating the implementation of Solvency II public disclosure and, in case of diverging quality of public disclosures, will consider taking further regulatory actions.
The full text of the Note can be viewed here.
Responding to the Note, the Actuarial Association of Europe (AAE) drew attention to its position paper on “The independent review of Solvency II reports” and commented that the Solvency and Financial Condition Report (SFCR) is an important step in the realisation of transparency, one of the main goals of Solvency II. In its position paper, the AAE stated that “the SFCR should be subject to an independent review of high quality so that stakeholders have confidence in the appropriateness of the information disclosed”. Irrespective of such a review being carried out internally or externally, by an auditor or by another qualified professional, the AAE is of the opinion that readers and users of the SFCR should obtain full insight into the actuarial expert judgment used in the valuation of the risk exposure and technical provisions of an insurance or reinsurance undertaking. In order to assure stakeholders that the expert judgments applied in the process are appropriate, the AAE recommends obtaining an independent actuary’s opinion.
Read the AAE’s press release here.