Look-through Symposium: asset manager’s response


Dr Nathalie Aubry-Stacey, Director – Market Practice and Regulatory Policy Department, ICMA* The comments and concerns raised in the Symposium so far have helped to highlight the areas that still need to be addressed in respect of the look-through reporting requirements. In addition EIOPA’s response to the reporting public consultation published in July 2012 has added some more colour to the existing formal statements on the subject. Given that the consultation answers some of our questions we have chosen to address both in our response to the symposium. The ICMA Solvency II Working Group has read EIOPA’s updated guidelines and feedback statement with interest. We were particularly interested in comment 104 (page 19), noting that, “The template Assets D4 only requires look-through of asset category, three geographical zone and currency identification (as local or foreign), not a full look-through of investment funds as required for SCR calculation.” This is a question that the members had raised many times, and it is helpful to have clear and positive guidance from EIOPA. It would be useful at this point to receive a summary of what the QRT asset rules actually mean. There seems to be certain amount of confusion on what the look through means, how often it needs to be reported, who are exempted and what constitutes an investment fund. Working group members feel that some points have not received the full attention of EIOPA. We understand the European Authority’s view that the prudent person principle is paramount in the drafting of the reporting requirements. However we feel that a lack of clarity remains and some of the practical and compliance points raised by the participants in the symposium did not seem to resonate with EIOPA.

Implementation cost

EIOPA acknowledges the implementation and maintenance costs of the reporting requirements, but believes this should be considered within the context of the overall Solvency II implementation project. It has assessed the costs and benefits arising from the reporting package and believes that the revised package represents an appropriate balance between the cost of undertaking it and the needs of supervisory authorities to ensure the protection of policyholders and the assessment of financial stability. In a context in which the deadline for implementation has changed again (the vote on Omnibus II is now scheduled for 22 October) and in the absence of finalised technical standards, the working group believes that asset managers will have to continuously tweak their systems until full implementation, which will result in additional cost. Uncertainty over details, for instance NACE code, means that asset managers would have developed a system and potentially have to change it later when the details are finalised. EIOPA has confirmed what reporting requirements it could provide in this context and once the Level 1 text is agreed, we urge that guidelines are finalised as soon as possible. The working group also noted that proportionality was needed when providing and analysing all small investment positions – this would be time consuming, for all parties, and may not even be relevant. Moreover, obtaining information from hedge funds on a global market can be delicate and difficult. Unfortunately EIOPA disagrees with this view. It believes that there will be a one-off cost: the administrative cost of reporting after the first implementation phase, and that additional cost would be limited since only basic information is required. We believe it adds an unnecessary cost with limited, if any, benefit from a regulatory or portfolio risk assessment.

Inconsistency of reporting

Solvency II would bring benefits as long as reporting requirements are consistent across Europe and there are no additional national requirements. This is particularly important for global asset managers who are working on EU reporting platforms, and would want to avoid having to use different technologies to comply with different national requirements. At the same time central banks will also impose their own data collection requirements that may not follow the same asset mapping mechanism. Although we understand that EIOPA and the ECB are working to converge on this there will probably still be additional information that central banks will be requesting and it may also be required at different frequencies. The working group urges central banks and EIOPA to converge their requirements to avoid additional cost.

The CIC Code

Finally we would like to address the issue of Complimentary Identification Codes, which we believe will have significant implications for the reporting requirements. The ICMA working group, like many other respondents, explained that the use of a CIC classification would promote greater homogeneity and simplification of reporting, easing EIOPA’s mission and facilitating the aggregation of data for risk analysis. The working group noted however that, as of today, such a CIC does not exist. Indeed, different actors (insurers as well as asset managers) are using different classifications in their portfolio and risk management activities. In its response to the public consultation, EIOPA highlighted that it expected that market participants would classify their assets accordingly with the CIC table, as this exercise is aimed at having a standard assets category and risk classification. However a harmonisation of the code is not envisaged in the near future. EIOPA further explains that, “The use of this code by supervisors to perform cross-sector and market analysis is a secondary aim. This secondary purpose is not undermined by the lack of harmonisation of the CIC, as it can be overcome by adequate supervision and use of financial information from service providers” (comment 68). Therefore it is probable that the same security will be assigned a different CIC by different groups and undertakings. There is a need to find a solution that will enable insurers to fulfil Solvency II obligations.


The new ‘Solvency II’ rules aim to replace old solvency rules and to establish a more harmonised regime across the EU. The reporting requirements and the feedback statement have clarified some of the points made by the industry, but failed to recognise the importance of some of the challenges the industry will face when implementing the Solvency II regime (notably without a common classification table) and the cost of its implementation. * Members of ICMA’s pan-European Solvency II Working Group include: Alliance Bernstein, Allianz Global Investors, AXA IM, Blackrock, BNP Paribas IP, Credit Suisse AM, Deutsche Bank AM, FandC, Goldman Sachs AM, ING, JP Morgan AM, PIMCO, Schroders, SSGA. Link to Symposium index page.]]>