Wednesday, 24 September 2014

KPMG on Pillar 3 and Public Disclosure - in or out?

Pillar 3 - rude awakening?
The operational reality of Solvency II Pillar 3 is seemingly about to deliver a ruder awakening than breakfast at Chubby Brown's. Whilst for example the UK's regulator has offered an element of flexibility in the content of the QRT reporting to be submitted during the Solvency II preparatory phase (Q21 here), Finance functions across the EU will be in an spreadsheet-fuelled scramble to deliver Solvency I, Solvency II and public reporting from now on in.

The lie of the land is not pretty as it stands. Evidently the PRA's crack team of Pillar 3 regulator and industry expets is tabling some sobering questions, given their recently revised Q&A, and both software solution providers (here) and asset data firms (here) continue to ebb and flow with their contributions to preparedness, depending on the pay-off. Some co-odination efforts have recently begun on asset data transference involving the larger EU players, but doesn't yet sound like the golden ticket for the teams charged with delivering Pillar 3 material.

Even EIOPA, the new custodians of the word ERRATA, are seemingly tied up with the less technologically developed EU members in an Excel-flavoured workaround to the xBRL question which, judging by the number of QRT template amendments already applied, has an air of inevitability about it.

It was therefore nice to see one of the Big 4 release results from this survey on how firms are preparing for Pillar 3 in the content of existing and future public disclosure requirements. Small sample (11 firms, all multinationals), and all evidently have existing plc-type disclosure requirements, but the topics and trends covered should inform anyone in the Pillar 3 space who has transitioning on their agendas.

Worthy of note:

  • Pre-Solvency II disclosure of quantitative material not favoured - not much to be gained I suppose
  • No-one planning to publish projected capital adequacy!
  • Responders in IMAP seemingly working on the basis that "Plan B" won't be required
  • Few likely to publish "internal views of capital" ( for this read "overall solvency needs" or "ORSA Capital") - analysts felt unlikely to be looking for it.
  • Most common differences between Pillar 1 and OSN used were treatment of contract boundaries and the risk-free rate, with the list of distinctions going into double figures
  • Some provisional plans for IFRS alignment on the balance sheet methodology front
  • Embedded Value about to be jettisoned as a reporting metric - analysts are of course devastated!

Who said accountancy was boring?

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