Loss Absorbing Capacity of Deferred Tax in the 2019 QRTs

A number of new fields relating to Loss Absorbing Capacity of Deferred Taxes (LAC DT) have been introduced to the 2019 Solvency II QRTs.

The new fields, in template S.25 and its variants, reflect more information on the way the Loss Absorbing Capacity of Deferred Taxes is calculated.

Details of the changes were published on 27 November 2019 (see COMMISSION IMPLEMENTING REGULATION (EU) 2019/2102). Data for these cells is available on Solvency II Wire Data. The Bank of England has also provided useful guidelines on the new LACDT templates

The regulations are somewhat unclear on whether insurers should have reported these templates in relation to the 31 December 2019 QRTs (emphasis added): “The amendments to Delegated Regulation (EU) 2015/35 that require the disclosure of information used in the calculation of the adjustment for the loss-absorbing capacity of deferred taxes are to apply from 1 January 2020. The amendments provided for in this Regulation are made to incorporate those requirements into the relevant templates laid down in Implementing Regulation (EU) 2015/2452. Therefore, this Regulation should apply from the same date.”

To date 353 insurers (about 10% of all solos) have filled in the new cells in the 2019 QRTs (although 42 noted they were not applicable to their business).

The majority of filings were in Germany, France, Spain and the UK (see chart).

About half of the filers are composite insures (170) and the remainder split between non-life (106) and life (77) firms (see charts).

The majority of filers use a standard formula, reflecting the distribution of the overall sample.

The new S.25 LAC DT QRTS include the following fields:

LAC DT justified by reversion of deferred tax liabilities S.25.01.21__R0650_C0130

LAC DT justified by reference to probable future taxable economic profit S.25.01.21__R06600650_C0130

LAC DT justified by carry back, current year S.25.01.21__R06700650_C0130

LAC DT justified by carry back, future years S.25.01.21__R06800650_C0130

Maximum LAC DT S.25.01.21__R06900650_C0130

Solvency II Wire Data collects all available public QRT templates for group and solo.

QRT templates available on Solvency II Wire Data 
S.02.01 Balance sheet
S.05.01 Premiums, claims and expenses Life & Non-life
S.05.02 Premiums, claims and expenses by country Life & Non-Life
S.12.01 Life and Health SLT Technical Provisions
S.17.01 Non-life Technical Provisions
S.19.01 Non-life Insurance Claims Information

S.22.01 Impact of long term guarantees and transitional measures
S.23.01 Own funds
S.25.01 SCR Standard formula
S.25.02 SCR Standard Formula Partial Intern Models
S.25.03 SCR Standard Formula Intern Model
S.32.01 Undertakings in the scope of the group