Why group supervision?
Solvency II introduces a holistic approach to group supervision. Group activity will be monitored at the highest level at which decisions about the group are being taken.
EEA insurance groups will now have a single regulator for the entire group and will have the option of reporting at group level. This change is increasing the complexity and importance of data management and the need to set up an effective reporting infrastructure.
The importance of groups
The CEA estimates that in 2007 there were 125 large insurance groups and approximately 500 medium-sized groups in the European insurance market (see chart for the breakdown of market share by size and number of companies). “The European insurance industry,” according to the CEA, “consists of a wide mix of companies and groups ranging from large multinationals to smaller regional or local operators.” [caption id="attachment_1249" align="alignright" width="373"]
Solvency II group supervision
Group supervision under Solvency II will be conducted through the supervision of the group head office or its holding company (regardless of whether that entity is an insurance company or not). But, as the FSA points out in an early document, group supervision pits the treatment of individual entities against that of the entire group. “The challenge in putting forward a proposal for the structure of group supervision under Solvency II is to balance two competing views of an insurance group: one view sees an insurance group as a single economic entity within which risks are pooled and diversified, the second recognises the group as a collection of separate legal entities with segregated risks.” Solo entities will still be supervised by their local regulator but the regulators will have to work with the group supervisor and this will increase the complexity of reporting.Reporting
Solvency II allows groups to report as a single entity. Firms can apply to the group supervisor to submit both an ORSA (Own Risk Solvency Assessment) and a SFCR (Solvency and Financial Condition Report) for the whole group. ORSA outlines the firm’s risk profile and its ability to match future liabilities while the SFCR is the firm’s public disclosure under Pillar 3. However reporting will remain just as rigorous. Both reports must have sufficient detail of each individual solo entity in the group and they will be shared with all relevant supervisors.Data challenges for group supervision
It’s not surprising that data and an infrastructure to collect and report data is high on the agenda of most firms. In the annual Deloitte Solvency II Survey, which focused primarily on the UK industry, data infrastructure and data handling processes were ranked 3rd as an area organisations will be focusing on most in the next six months.

