The pillars of Solvency II and proper data management

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Contents

The Solvency II / Solvency 2 simply structure its content in three parts. We will proceed to briefly explain what these three pillars consist of..

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Photo credits: artJazz

Solvency II Pillar 1. Quantitative requirements:

Solvency II presents important novelties in the quantification of the capital of insurers, in the form of a balance sheet report and in the establishment of a requirement for new technical reserves, asset valuation and risk weighting associated with operations and clients.

This element is intimately linked to the data available to the company, how it is built and how the information is obtained to feed the internal model.

The correct actuarial calculation is determined by precise variables that depend on a data ecosystem that is often dispersed and can be modified at any time.

The day to day can cause that data to be duplicated, inconsistent, invalid, incomplete or even non-existent. To perform the calculation it is necessary to have controlled the data and processes on which they depend. Incorrect or incomplete information is difficult for risk modeling and analysis.

Failure to comply with these precepts implies the application of sanctions and coercive measures, as well as the increase in the cash ratio.

Solvency II Pillar 2. Corporate Governance:

The auditability rules and external intervention and internal control requirements. Among the internal control items included in Solvency II, developments in risk management are found, stress tests, internal and actuarial audit and continuity of testing.

One of the most significant novelties is that although so far the supervisor had to prove that the insurers were violating the rule., now it is the insurer who is responsible for demonstrating the due diligence in the report and in the correction of the information.

This implies the need to values typified in the Pillar 1 Solvency II They are superbly documented and must be justified so that as soon as an external auditor arrives he understands where the information comes from., what functions it goes through, what they are for and what their purpose is.

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Solvency II Pillar 3. Transparency and market discipline:

This Pillar II of Solvency refers to the data that companies must provide to the regulator and the market.. We simply refer to: Balance, Heritage, Required Capital (SCR and RCM), Variation Analysis, Assets, Technical Life Provisions, Non-Life Technical Provisions and Reinsurance.

Pay special attention to process monitoring and the people who interact with the data, the availability and sufficiency of these and the control processes.

Reports must be published on the entity's web portal for five years. The periodic report must be sent to the supervisory body in electronic format every three years, indicating the changes made. At the same time, from 2017, this information should not only be sent to the supervisory body, but also to the ECB.

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