Question ID: 1029
Regulation Reference: (EU) No 2015/2450 - templates for the submission of information to the supervisory authorities
Article: 35
Status: Final
Date of submission: 20 Dec 2016
Question
NN Group has a Non-EEA company in Japan (NN Life Japan) for which NN Group received the confirmation from the Dutch NCA (DNB) to treat NN Life Japan as an equivalence entity which may be reported under method 2 (D&A).
As a result NN Life Japan reports only one line (participations) in the QRT S02.01 based on local sectoral rules. Although there is no reconciliation with the SII Balance sheet D&A entities are still required to report all asset QRTs. This in contradiction to the Other Financial Sector (OFS) companies. OFS companies have a similar treatment on the S02.01 as D&A companies (in one line Participation) but are not required to report the asset QRTs.
For NN Life Japan the S06.03 (Look Through) template is extremely difficult to deliver:
• Details on those funds managed by external asset managers take significant effort to collect and process, not to mention the time lag involved (~2 months post reporting date)
• From a legal view approval is needed, we cannot place any such look through data request to most external managers w/o having specific executed agreements (NDA) in place
• Most investment managers provide only data for funds they ultimately manage
• Solvency II reporting timelines are not in line with data governance practices of non-EEA fund managers
• Unit linked funds where all risks relating to holding of these assets is borne by the policyholder, When the risk is borne by the policyholder the related assets should be exempt from the look-through requirement. The impact of the exclusion of that piece of information is insignificant on the SCR value but provides a real relief to the companies.
EIOPA answer
EIOPA confirms that ITS requires undertakings in D&A to report line-by-line in S.06.02 and also in S.06.03.
EIOPA believes that the look-through is required for the supervision of the Prudent person principle at group level as well. As part of this principle the group needs to be able to identify the risks to which it is exposed and this is only possible with the look-through of CIU. To be able to comply with this requirements at group level all investments within the group should be covered by the requirement. The only exception is the one to entities from other financial sectors.
In the situation described the group could discuss the use of proxies with the NSA and the discussion would need to take into account the materiality of the amounts. However the general principles of risk management and of the reporting requirements need to be complied with.
In relation to unit linked:
Excluding unit-linked assets undermines a comprehensive view of the undertaking risk profile, in particular contagious risk. The security-by-security reporting will also concern unit-linked products, since we consider that these also present specific risks (for instance, undertakings selling bonds issued by entities of their own group, leading to conflicts of interests; or undertakings exposed to reputational risk if they have a major problem on one of their unit-linked; etc.).