Question ID: 712
Regulation Reference: (EU) No 2015/2450 - templates for the submission of information to the supervisory authorities
Article: 35
Template: S.23.01
Status: Revised
Date of submission: 19 Oct 2016
Question
As per EIOPA validation file, validation BV505 is as follows:
{S.23.02, r0660,c0110} Excess of assets over liabilities attributable to basic own fund items (excluding the reconciliation reserve) = {S.23.01, r0730,c0060} Other basic own fund items
Cell R0730 of S.23.01 includes, among other things, surplus funds and net deferred tax assets. Hence, including these two items in cell R0660 of S.23.02 will cause double counting as these items are already taken account of in asset valuation differences (R0600), technical provision valuation differences (R0610) or other liabilities valuation differences (cell R0620). Therefore, we believe validation BV505 is incorrect.
The reconciliation in cells R0600 to R0700 of S.23.02 to work the validation BV505 should be adjusted as follows:
{S.23.02, r0660,c0110} = {S.23.01, r0730,c0060} - {S.23.01, r0070,c0010} - {S.23.01, r0160,c0010}
Can EIOPA confirm if they agree with us? If EIOPA agrees with us, can we ask EIOPA to correct the validation BV505 as suggested above?
EIOPA answer
Please note that the answer to this questions has been revised as follows: In template S.23.02 the Reserves from financial statements adjusted for Solvency II valuation differences (C0110/R0650) is explained by its different components of different valuations and total of reserves and retained earnings from financial statements. The Solvency II EoAoL (C0110/R0700) is then the Reserves from financial statements adjusted for Solvency II valuation differences (C0110/R0650) plus Excess of assets over liabilities attributable to basic own fund items (excluding the reconciliation reserve) (C0110/R0660).
Surplus funds are defined in Art. 91 of SII Directive. They do not constitute insurance and reinsurance liabilities to the extent that they fulfil Tier 1 criteria (Art. 91 para.2). Consequently, Surplus Funds can be split into two parts: One part that is to be considered as BOF which is eligible as Tier 1 and a second part that is to be considered as liability. Therefore, in S.23.01 only the Surplus Funds defined as BOF as foreseen in Art. 91 para 2 are to be reported in R0070. A similar situation may be applied to Deferred Tax Assets.
In relation to DTA and Surplus Fund that is not considered as BOF but as liability, R0650 should reflect the value of the different valuation of DTA between SII and financial statements and the value of Surplus Fund, as the values are considered in the rows reflecting the different valuation (R0600 to R0620).
At the same time, BV505 implies that S.23.02.R0660/C0110 is equal to S.23.01.R0730/C0060. We believe that this equality should apply and is fully in line with the definition of Reconciliation Reserve.
To comply with the explanation above and keep this equality when filling S.23.02 undertakings should:
•In R0600 to R0620/C0100 consider the variation of Surplus Fund that is considered as BOF according to article 91 of the Directive and of the DTA (as defined in article 76 of the Delegated Regulation);
•BV 398, 399 and 400 has been de-activated.
Please be aware that in S.23.02 R0650 = R0600 - R0610 - R0620 + R0630 (+ R0640), where all "increase" of valuation should have a "+" sign and all "decrease" of valuation should have a "-" sign for R0600, R0610 and R0620.