Eleven Member States confirmed they would not require an external audit of the Solvency II data.
Research conducted by Solvency II Wire, reveals that currently NCAs in only ten Member States will require an external audit of the data. A further four are consulting on the matter.
The survey covers 25 Member States (excluding Bulgaria, Luxembourg and Romania). Information for all but three of the 25 comes from the NCAs.
Yes: Austria, Belgium, Cyprus, Germany, Hungary, Netherlands, Poland, Portugal, Slovenia, Spain
No: Croatia, Czech Republic, Denmark, Estonia, Finland, France, Greece, Lithuania, Latvia, Norway, Sweden, Slovakia
Consulting: Ireland, Italy, Malta, UK,Gibraltar
Further details of the requirements and intentions of each Member State are available on the Solvency II Interactive Implementation Map.
In July 2015 EIOPA published an opinion on the “Need for high quality public disclosure”, saying that it believed an external audit of the Solvency II public disclosures could be a “powerful tool” to ensure high quality public disclosure for Solvency II purposes.
The document states: “In order to make best use of external audit in the context of [the] SFCR [Solvency and Financial Stability Report], EIOPA is of the view that at individual and group level main elements of the SFCR (balance sheet, own funds and capital requirements) of all insurance and reinsurance undertakings could fall within the scope of an external audit.”
Door remains open for audit
In some cases NCAs have left the door open for requiring an external audit under specific circumstances. In the Czech Republic, for example, the NCA said that in case of “deficiencies in insurance and reinsurance activities” it might require an external audit to verify the System of Governance and information in the SFCR.
In France the ACPR said that although there was no legal requirement to audit the Solvency II data it “supports the requirement of an audit” of at least some parts of the SFCR: Solvency II Balance sheet, own funds (including eligibility and classification) and capital requirements (SCR and MCR).
External audit: a contentious and costly issue
The requirement to conduct an external audit of the Solvency II data has been contentious as many insurers argue that the Directive contains sufficient checks and balances and the audit is an additional cost burden on insurance entities.
In March this year the Association of Mutual Insurers and Insurance Cooperatives in Europe (AMICE) raised alarm bells about the cost of reliance on credit ratings in Solvency II (pdf).