Question ID: 785
Regulation Reference: (EU) No 2015/2450 - templates for the submission of information to the supervisory authorities
Article: 308
Status: Final
Date of submission: 30 Aug 2016
Question
On the background of the requested step-by-step we raise concerns whether the formulas given for the columns C0050, C0070 and C0090 are correct. This is because of the following aspects:
1. As of our understanding of the requested step-by-step approach the impact of each transitional measure resp. adjustment should be calculated as “value calculated with measure X turned on minus value calculated with measure X turned off”. In the description of the QRT this only holds for C0030.
2. C0050 is defined as the difference between C0040 and C0010. Apparently this formula considers that the application of the transitional on technical provision (Article 308d SII Directive) excludes the application of the transitional on interest rates (Article 308c SII Directive) and vice versa. But this is only true on solo level; on group level it is possible that one undertaking of the group applies Article 308d and another applies Article 308c such that C0050 should rather be calculated as the difference between C0040 and C0020.
3. The formulas for C0070 and C0090 contradict with our understanding expressed under 1. Therefore we kindly ask to explain the rationale for these formulas. It may also be helpful to explain in more detail the step-by-step approach, e.g. by providing an overview table which displays which transitional measures / adjustments is turned on resp. off in which of the columns C0010, C0020, C0040, C0060 and C0080. It is especially unclear to us whether in C0040 only the transitional on interest rates is turned off or also the transitional on technical provision.
4. In addition to 3. we noted that apparently the Maximum-Function requested in columns C0070 and C0090 assumes that the impact of turning off the transitional measures / adjustments is an increase in numbers. While this is for instance true for Technical Provisions (R0010) this is not to be expected for e.g. Basic Own funds (R0020) and other rows. Thus we suggest to reconsider the use of the Maximum-Function for each row.
5. With the exception of 2. the same concerns apply to the solo version of this QRT.
For reasons of clearness of requirements we suggest to define all calculation logic to be applied on this QRT to be expressed in formulas (rather than words). We only found some formulas within the XBRL taxonomy 2.0.1. (BV60, BV62, BV63, BV64, BV65, BV66, BV67) for this QRT especially not those addressed under 3.
EIOPA answer
Please consider the following clarifications:
• C0010 – amount with ALL transitionals and measures
• C0020 – amount without transitional on TP but keeping the others (at group level, keeping IR transitional if applicable)
• C0030 – impact = C0020 – C0010
It is correct that at group level, both transitionals could be used, but never addressing the same undertaking.
• C0040 - amount without interest rate transitional (at group level, also without the TP transitional if applicable)
• C0050 – impact of IR transitional = C0040 – C0020
It is correct that at group level, both transitionals could be used, but never addressing the same undertaking.
BV64 and BV67 should be amended to reflect this approach.
In the Instructions of S.22.01.C0050 the text should have read: "It shall be the difference between the technical provisions without transitional on interest rate and the and the technical provisions reported under C0020."
Please note that if:
• In C0020: If you don't have TTP, report value in C0010 and impact '0'
• In C0040: if you don't have TRFR, report value in C0020 and impact '0'
• In C0060: if you don't have VA, report value in C0040 and impact '0'
• In C0080: if you don't have MA, report value in C0060 and impact '0'
Regarding C0070 and C0090, the MAX function should also not apply. A detailed assessment of the different items allowed us to conclude that when it comes to TP, amounts before transitionals are higher than amounts after transitionals, but this is no longer true for other items in the template, like OF, as you stated. OF before transitionals are generally lower than after transitionals, so it should be "min" instead of "max". However, in some cases, like Tier III available OF, the amount after transitionals can be higher (because of new deferred tax assets) or lower (because of the limits in the Directive (1/3 of total OF) which might apply for undertakings breaching the SCR) than the amount before transitionals. We have the same problem with SCR for undertakings applying matching adjustment. SCR after MA can be lower (lower life and spread SCR) or higher (lower diversification effects). Therefore we should not use "max" or "min" in the formulas.
EIOPA is not introducing any validation at this point but possible formulas would be:
C0070 = C0060 – C0040
C0070 = C0060 – C0010 – C0030 – C0050
C0090 = C0080 - C0060
C0090 = C0080 – C0010 – C0030 – C0050 – C0070