EIOPA has published the official Draft of ITS amendments for reporting of year end 2023 (happening in 2024) and submitted them to the European Commission. The changes outline in them will be implemented as part of EIOPA Taxonomy 2.8.
The final changes that came out of the public consultation on the topic and are included in the first public working draft of EIOPA Taxonomy 2.8 amount to circa 80 revised, 40 new and 30 removed templates and nearly 150 new dropdowns. In the workshop “Taxonomy meets market” on 6th of April, EIOPA has addressed the concerns that the implementation times for the amendments and bringing IFRS 17 into force are the same, however, no postponement are considered at this stage, as EIOPA has stated that the amendments will lessen the regulatory burden of Solvency II and the impact for reporting is not expected to be material.
The main changes can be divided in multiple parts – entry points amendments, and new templates and deleted templates.
The most notable change for taxonomy 2.8 is that the entry points for annual financial stability reporting entry point, including Annual Financial Stability Solo (afs), Group (afg) and Third Country branches (afb) were permanently removed from reporting.
The ECB reporting entry points were not covered in the first version of the public working draft, however, those are expected to be included in the second public working draft published in June.
The following templates has been permanently removed from the reporting:
- S.03.02 - Off-balance sheet items - List of unlimited guarantees received by the undertaking;
- S.03.03 - Off-balance sheet items - List of unlimited guarantees provided by the undertaking;
- S.05.02 - Premiums, claims and expenses by country is removed from solo reporting; however the template is kept in group reporting;
- S.06.01 - Summary of assets;
- S.08.02 - Derivatives Transactions;
- S.15.01 - Description of the guarantees of variable annuities;
- S.15.02 - Hedging of guarantees of variable annuities;
The new templates can be divided in multiple broad categories:
Cross-border business: The new templates S.04.03, S.04.04 and S.04.05 for cross-border business have been added to replace replacing S.04.01 - Activity by country; and S.05.02 - Premiums, claims and expenses by country. Template S.04.03 provides list of underwriting entities including lists of all EEA and non-EEA branches of the insurance undertaking, template S.04.04 focuses on the location of underwriting and template S.04.05 focuses on the location of risk. Details are split on a location of risk basis and at the level of the individual country by country basis for both EEA and non-EEA business. In addition, a risk-based threshold of 5% Gross Written Premiums on S.04.05 has been introduced.
Climate change-related risks to investments: The new template S.06.04 - Climate change-related risks to investments consists of only four cells, which divide the information between physical and transition risk:
- Climate change-related transition risk - KPI
- Climate change-related physical risk - KPI
- Justification for not reporting climate change-related transition risk - KPI
- Justification for not reporting climate change-related physical risk – KPI
The KPIs can be calculated using own methodology and EIOPA proportionality rules still apply, meaning that if the undertaking can explain in the ORSA report why those risks are not material. However, it is worth mentioning that the template S.06.02 – List of assets has also been amended with additional columns for climate risk reporting.
Non-life obligation analysis: To increase the supervisory visibility over non-life products EIOPA has added the template S.14.02; The information on the number of contracts, the written premiums, commissions, claims paid, country and information on the number of insured is to be reported per LoB and product category.
Cyber underwriting risk: A new template S.14.03 has been added dedicated to products covering cyber risk including information on the target market (B2B or individual) and nature of the loss covered, information if cyber risk is the main component of the policy or an add-on, and which types of cyber risks are covered
Internal model templates: Multiple new templates are replacing the S.25.02/S.25.03 for internal model reporters, one for each risk module:
- S.25.05 - Solvency Capital Requirement for undertakings using an internal model (partial or full);
- S.26.08 - Solvency Capital Requirement for undertakings using an internal model (partial or full);
- S.26.09 - Internal model: Market and Credit risk for financial instruments;
- S.26.10 - Internal model Credit event risk Portfolio view details;
- S.26.11 - Internal model Credit risk details for financial instruments;
- S.26.12 - Internal model Credit risk Non Financial Instruments;
- S.26.13 - Internal model Non life & Health NSLT Underwriting risk;
- S.26.14 - Internal model Life and Health underwriting risk;
- S.26.15 - Internal model Operational risk;
- S.26.16 - Internal model Model Changes;
EIOPA has announced that they used the specific internal model templates from several NCAs and incorporated them in the new Solvency II reporting templates. Therefore, NCAs are expected to consider eliminating the specific IM templates wherever possible so no duplicate reporting is requested.
These templates shall be reported based on availability according to the internal model architecture and risk profile when possible, with reasonable effort. The data to be reported shall be agreed between national supervisory authorities and insurance and reinsurance undertakings.
Intra-Group Transactions templates: The templates from the S. 36 series (S.36.01 – S.36.05) have been aligned with FICO tables and so additional information is required in all of them. The tables in some of the templates have changes so much that they are marked as completely new.
Risk Concentration Templates: The S.37 series have also been aligned with the FICO and reflecting improvements and lessons learned from EIOPA’s data analysis and past years’ experience.
In S.37.01 a new approach has been used – the table consist of exposures by counterparty (and not item by item), by the value of the exposures in each kind of instrument listed in the template) by single counterparty outside the scope of the group. Only significant exposures should be listed.
The new templates S.37.02 and S.37.03 consist of summary tables by main drivers - currency, sector, country, asset class and rating, based on all group’s exposures to third parties, including significant and not significant.
How does this affect our services
As usual our services will be continuously updated with each new version of EIOPA taxonomy. Specifically for taxonomy 2.8, due to high number of changes we will implement the new changes, as soon as they are final and, in the meantime, keep you apprised of intermediate versions.
The full Business package for all templates can be found here.
The annotated templates can be found here.