Regarding the quantitative reporting template S.12.01 for the preparatory phase I would appreciate a confirmation on the following issues:
In the Additional Information section, the BE is required to be reported by country (cells JA1 to JA14). The countries to be reported individually are determined in terms of the materiality threshold defined in Technical Annex I as follows: "for the countries representing up to 90% of the Best Estimate for direct business on a certain Line of
business, with the rest being reported in items For European Economic Area countries outside the materiality threshold or For non-European Economic Area countries outside the materiality threshold”.
My questions regard the expresion "for the countries representing up to 90% of the Best Estimate for direct business on a certain Line of business, ...".
1) Does this mean that the 90% has to be reached for each line of business instead of in terms of all lines of business?
Countries that represent up to 90% of LoB 1 need to be reported separately (for example 2 countries).
Countries that represent up to 90% of LoB 2 need to be reported separately (for example 3 countries).
WIth this approach we have a different number of material countries for each LoB.
However, if we calculate the material countries in terms of total LoBs (LoB1+LoB2), these could be 4 countries.
Which is the correct approach? How many countries should be reported separately?
2) The materiality threshold is calculated based on BE for direct business only? Or should accepted reinsurance be included?
Technical Annex I says direct business only but looking at the definitions for cells JA1-JA14 it includes accepted reinsurance also.
This is the defintion for cells JA1-JA14:
"Amount of gross BE by country of the location of risk underwritten, for each of the countries in the materiality threshold, except the home country, for each of the following Life LoB and totals (Life other than health insurance, incl. Unit-Linked and Health similar to life insurance):
Insurance with profit participation
Index-linked and unit-linked insurance
Other life insurance
Annuities stemming from non-life insurance contracts and relating to insurance obligation other than health insurance obligations
Total (Life other than health insurance, incl. Unit-Linked)
Health insurance (direct business)
Annuities stemming from non-life insurance contracts and relating to health insurance obligations
Health reinsurance (reinsurance accepted)
Total (Health similar to life insurance)" (for example cell AJ7 is prepared to be completed, it does not appear in grey)
Besides, in terms of consistency, the QRT S.27.01 (TP-E1) for the cells where BE has to be reported by country in the materiality threshold (cells A44-L44), it only takes into account direct business.
Information reported by country shall at least represent 90% of the Technical Provisions as a whole and Gross Best Estimate of any line of business.
If a specific country has to be reported for a particular line of business to comply with the threshold then that country shall be reported for all lines of business.
In fact we have a different situation in Life and Non-Life templates.
The Non-Life templates do not require the reporting of the information on accepted reinsurance by country while the Life templates require both direct business and accepted reinsurance.
The option taken in Non-Life is mainly due to the different criteria that would have to be used between the direct business and the reinsurance business so the decision, after previous consultations, was to ask only for direct business.
The thresholds need to consider the accepted reinsurance in case of Life and only direct business in case of Non-life.