Regulatory reporting challenges within the insurance industry

Regulatory reporting updates - blog article

On June 1st, 2022, the European Insurance and Occupational Pensions Authority (EIOPA) published the latest proposed updates to its XBRL taxonomies and data point models (DPMs), used to connect digital definitions with reporting requirements. At the moment, these second public working drafts (PWD2s) are all open for public feedback.

Unusually the PWD2s of both version 2.7.0 and version 2.8.0 of the Insurance Data Point Model and Taxonomy, used for Solvency II reporting, are out for review at the same time. Also available are the PWD2 of version 2.7.0 of the Pension Funds Data Point Model and Taxonomy, and of version 2.7.0 of the PEPP PR Data Point Model and Taxonomy, to be used for prudential reporting on Pan-European Personal Pension Products (PEPPs). A number of further drafts and final versions are due in the coming weeks, so watch this space for further news.

Solvency II is one of the most complex regulatory frameworks, requiring insurance undertakings to submit detailed reports on a regular basis.

The scope of data reported within the Solvency II framework is subject to regular changes, with EIOPA’s Solvency II review, expected to impact insurance undertakings in 2022. Aside from the impact of international regulatory changes, insurers need to comply with ever-changing reporting requirements when filing to their respective National Competent Authorities (NCAs) and comply with the required XBRL format for reports, adding to the complexity of the Solvency II regime. With b.rx, our solution, we are able to cater to insurers’ Solvency II reporting needs for EIOPA requirements.

How to manage regulatory reporting changes?

Asset managers and insurers are facing constantly growing regulatory reporting requirements and a strong demand for digitalization. Regulatory reporting is the submission of data to a relevant authority in order to demonstrate compliance with the necessary regulatory provisions. In simpler terms, it is the process businesses and individuals must continually go through to show they are following all the rules.

Beyond the need to meet the requirements of regulators, it is necessary to put in place an organization and procedures to promote the rationalization of resources and the reliability of data. The system put in place must also combine reliability and flexibility to deal with a fluctuating regulatory environment.

Our regulatory reporting service helps you to fulfill this increasing demand with comprehensive managed solutions tailored to your needs. Our cloud-based, data-driven platform enables to :

  • Comply with regulatory reporting obligations with specific issues regarding the data to be used as well as the deadlines to be met
  • Make optimal use of data by ensuring synergy with other information produced elsewhere for internal (dashboards, etc.) or external (financial publications, etc.) needs.
  • Structure the production process to ensure data integrity, auditability, and reliability
  • Follow the evolution of the regulatory context which requires a proactive organization

Technical implementation

The Data Point Model (DPM) is a structured representation of the data, identifying all the business concepts and their relations, as well as validation rules. The DPM contains all the relevant technical specifications necessary for developing an IT reporting solution (independent of the technical format).

The EIOPA XBRL Taxonomy presents data items, business concepts, relations, and validation rules described by the DPM in the technical format of XBRL.

EIOPA publishes updated information on the DPM and XBRL Taxonomy design on its website in order to increase awareness and collect technical feedback from relevant market participants.

To get prepared for XBRL taxonomy updates you should understand what changes to expect when your regulators revise a taxonomy. Official taxonomy governance documents will help you learn what exactly they update and how often. Then, you’ll analyse how the updates affect the reports you’ll need to submit in the future. In general, changes in taxonomies imply:

  • Technical updates impact the taxonomy but don’t change the scope of data. The existing validation rules may be refined. Tables in the new reports may look different but still require reporting the same data set.
  • Business updates impact the taxonomy and the scope of required data. The taxonomy may have new validation rules and modules. The reports may have new tables (or new rows and columns in old tables) to be filled with data that wasn’t required before.

Some regulatory authorities advanced in XBRL reporting far enough to establish best practices. They properly govern their XBRL taxonomies and have solid workflows for managing change.

For example, EIOPA schedules only one regular Solvency II XBRL taxonomy release per year and one more corrective release in case a hotfix is needed. The new taxonomies are ready six months before the reference date and eight months before the reporting deadline. Therefore, reporting entities have enough time to prepare for XBRL taxonomy updates:

  • A public working draft (PWD) of the EIOPA taxonomy becomes available for NCAs, reporting entities, and software vendors by 1 June of year N.
  • An official new taxonomy version is published by 15 July of year N.
  • A corrective release is made on 2 November (2 months before submissions start).
  • The first report to be submitted under the new taxonomy is for Q4 of year N.

The supervisory authorities strongly encourage companies to use the most recent version of the relevant taxonomy for their XBRL submissions to take advantage of the most up-to-date tags related to new accounting standards and other improvements.

b.rx as a regulatory reporting tool for Insurance

There is a way for reporting entities to create test reports under the latest version of XBRL taxonomies shortly after its release. You can leverage lightweight single-purpose XBRL report validation tools that are among the first to introduce taxonomy updates.

For example, b.rx offers a swift implementation turnaround of new versions of taxonomies and validation rules. With this tool at hand, you can:

  • Enable the delivery of regulatory quantitative reports for various global insurance solvency regimes.
  • Use a single strategic platform for all the data and quantitative reporting aspects of Solvency II and other global insurance regulatory regimes governing risk and capital management.
  • Get the right data in the right place at the right time, to deliver accurate and timely reports to regulators and the market.
  • Simplify the demands of reporting by capturing, consolidating, and reporting data in the appropriate EIOPA quantitative reporting templates.
  • Make the regulatory change management process less hectic by familiarizing yourself with the changes in the taxonomy early on.
  • Indicate issues in the reporting templates or validations and provide feedback on the changes introduced to the public working draft of the new taxonomy.
  • Have an additional layer of quality assurance to check your internal systems.

When the latest version of an XBRL taxonomy becomes available for download, you get a notification of its availability in b.rx. Then you can create reports using the new taxonomy, validate the reported data, correct errors, and export reports to XBRL—all far before the filing deadlines.

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