A step in the dark: When Solvency II reporting becomes hit and hope

12 May 2016

I have to admit I don’t normally spend a lot of time worrying about the imagery we use in our communications – all those stock shots tend to merge into one after a while. But recently I had to put my hand up and say this photo really isn’t right.

We were finishing off a flyer about the reporting challenges facing our clients. You’ll have got some sense of my feelings on the matter from my last blog when I said that “most finance teams find themselves somewhere up a creek”. It was getting late and the designer was pressing for sign-off. But the photo the designer had chosen, which featured three steely tri-athletes about to leap into the water, conveyed none of that. Yes, reporting may be something of an endurance test, but it isn’t a race. What we settled on was a far more apt image of an anxious-looking executive (well a model dressed as an executive) staring at an hour glass. With that image in place, you wouldn’t need to read the words to know that stress is rising and time is short.

Reviewing the unreviewable

There are many reasons why people are getting anxious. A lot of the information has never been disclosed before and there isn’t a lot of time to prepare it. But as we get closer to the line, the main questions I’m getting from CFOs and their teams, and even some Non-Execs, are “how can we make sure what we’re reporting is complete and accurate” and “how will we come across when it’s so hard to review what we’re disclosing – what will it tell the regulator about us?”

In most conventional sets of accounts, you’d be able to review each line, compare it over time and find explanations for the movement. But the XBRL format used in Solvency II is like reviewing unfathomable binary code. With all the data being put into a series of tagged templates, it’s very difficult to see what you’re disclosing to the regulator or know how they will interpret and use the information. These concerns are exacerbated by the fact that many different people and systems contribute and some of the data might not reconcile with the rest of your management information.

However you do it, it’s vital that you find a way to assess what aspects of your business and risk profile (e.g. sharp concentrations or movements in risk) might invite regulatory scrutiny and what questions the regulator is likely to ask. We’re doing our bit to help you make sense of what you’re about to send out through our new S2D2 tool, which turns all the jumbled data into a format you can easily visualise, review and validate. Any changes you want to make are then reformatted into the XBRL submission. Please contact us at [email protected] if you’d like a demonstration or want to know more.

Seeing is believing

So the moral of the story is that however pressed for time you are, it’s always good to be able to really understand what you’re disclosing and have the time and ability to change it if necessary. For those of you who are about to make this big step in the dark that is live Solvency II reporting – good luck! And if it all looks unbearably stressful, we’re here to help.

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