Annual Solvency Return and Annual Asset Data Instructions

Transcription

ANNUAL SOLVENCY RETURN (ASR) /
ANNUAL ASSET DATA (AAD)
INSTRUCTIONS
DECEMBER 2014
Version 1.0
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Contents
Pages
Section 1: Introduction
3
Section 2: General Instructions
7
Section 3: Form Instructions for Annual
Solvency Return (ASR)
12
Section 4: Form Instructions for Annual Asset Data (AAD)
34
Section 5: Qualitative Reporting
49
Appendices
1. EIOPA Complementary Identification Code (CIC) Table
2. Mapping of SII Balance Sheet to QMA002
3. Managing agent’s reports – ASR910 and AAD910
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1.1
Introduction
1.1.1
The PRA’s Supervisory Statement SS4/13 applies the requirements of EIOPA’s preparatory
guidelines to all PRA authorised firms falling within the scope of Solvency II. Among other things, it
requires the submission of interim Pillar 3 reporting to the PRA as at 31 December 2014 and
30 September 2015. This represents a part of the UK insurance industry’s preparations towards full
Solvency II compliance.
1.1.2
Accordingly, Lloyd’s will be required to submit to PRA, quantitative and qualitative data in respect of
the ‘association of underwriters known as Lloyd’s’ in aggregate. This shall be achieved by collecting
returns from managing agents in respect of each syndicate, and then aggregating this data with that
held centrally in respect of the Corporation, Central Fund and members’ funds at Lloyd’s.
1.2
Solvency II
1.2.1
It is confirmed that the Solvency II regime shall be implemented from 1 January 2016, with the
passing of the Omnibus II Directive (OMD II) by the European Parliament earlier this year. OMD II
confirms the high level legislative framework, including the Solvency II start date and certain
transitional measures, by making modifications to the original Solvency II Directive.
1.2.2
The next step in the completion of the legislative framework is the finalisation of the Level 2
measures, now known as Delegated Acts. The final text of these is currently being considered by the
European Parliament. Finalisation (i.e. adoption by the European Parliament) and publication of
these is expected in early 2015.
1.2.3
Finally, the European Insurance and Occupational Pensions Authority (EIOPA) is completing its work
on drafting the Level 3 measures, which will take the form of Implementing Technical Standards
(ITS) and Guidelines. EIOPA has already issued Guidelines on provision of information to national
supervisory authorities, which among other things introduces interim quantitative and Pillar 3
reporting as at 31 December 2014 and 30 September 2015. EIOPA is consulting on two broader set
of ITS and Guidelines; this includes a consultation on the Pillar 3 ITS, which shall cover the final
forms of quantitative and qualitative reporting, from December 2014 to February 2015, within Set 2.
The final Set 2 material shall be published in July 2015.
1.2.4
Lloyd’s shall review the final Set 2 requirements in advance of publishing its final requirements for
Pillar 3 quantitative and qualitative reporting, in Q3 2015. This shall address the full qualitative
reporting required from 2016 onwards.
1.3
Pillar 3 reporting
1.3.1
Pillar 3 represents the supervisory reporting and disclosure requirements under Solvency II.
Insurers are required to provide information, both for public disclosure and for private reporting to the
supervisor, on a quarterly and annual basis. This is necessary to enable a harmonised approach to
supervision across the European Union as well as improving the consistency of publicly disclosed
information.
1.3.2
The Pillar 3 requirements include annual and quarterly quantitative reporting (the completion of
standardised templates). In addition, the annual supervisory reporting requirements include an
element of qualitative reporting, which insurers are required to submit with their public Solvency and
Financial Condition Report (SFCR) as well as the private Regular Supervisory Report (RSR).
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1.3.3
However, the EIOPA Guidelines on provision of information to national supervisory authorities
introduce the requirement to report on a sub-set of the quantitative templates as well as aspects of
qualitative reporting – specifically on systems of governance, capital management and valuation of
assets and liabilities – as part of the interim reporting.
1.4
Application at Lloyd’s
1.4.1
Solvency II applies to Lloyd’s as a single undertaking – the ‘association of underwriters known as
Lloyd’s’ – as defined within the Solvency II Directive. However, within this, Lloyd’s expects each
managing agent to meet the full set of Solvency II tests and standards. In addition, the PRA expects
that the supervisory reporting requirements for each syndicate at Lloyd’s are consistent with treating
it as ‘any other insurer’. Therefore managing agents are required to complete Solvency II Pillar 3
returns to Lloyd’s on a similar basis to other European Union insurers.
1.4.2
The basis of Lloyd’s Pillar 3 reporting to the PRA is that Lloyd’s provides a SFCR, RSR and
quantitative reporting templates to the PRA. These returns are prepared from an aggregation of
syndicate level returns made to the PRA, together with the additional data held by the Corporation, in
respect of the Corporation and Central Fund, and members’ funds at Lloyd’s.
1.4.3
This basis of submitting to the PRA affects the timetable for syndicates reporting to Lloyd’s. In order
to provide Lloyd’s with sufficient time to review and aggregate the syndicate level data, as well as
adding the data held centrally, go through Lloyd’s governance process and expected audit
requirements (only anticipated in respect of some of the annual data under ‘full’ Solvency II), it is
necessary for Lloyd’s to collect returns from syndicates in advance of Lloyd’s (and other insurers’)
submission deadline to the PRA.
1.4.4
The syndicates and Lloyd’s deadlines for compliance with Pillar 3 requirements are summarised
below (shown in weeks after the reporting date):
Interim reporting
Solvency II
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1.5
Quantitative data requirements
1.5.1
Managing agents will be required to submit data as at 31 December 2014 and 30 September 2015.
1.5.2
The data at as 31 December 2014 must be submitted using the Annual Solvency Return
(ASR)/Annual Asset Data (AAD) provided within Lloyd’s Core Market Return (CMR) system. The
returns must be submitted to Lloyd’s by 2pm, 16 April 2015.
1.5.3
The data as at 30 September 2015 must be submitted using the Quarterly Solvency Return
(QSR)/Quarterly Asset Data (QAD) within the CMR system. Some of the forms required for the 31
December 2014 submission are not required as at 30 September 2015 and are shown as ‘N/A’ in the
table below. The returns must be submitted to Lloyd’s by 2pm, 5 November 2015 .
1.5.4
The specific forms to be submitted for the interim reporting are listed below:
Form Description
ASR Reference
QSR Reference
Balance sheet
ASR002
QSR002
Own funds
ASR220
QSR220
Non-life technical provisions by line of business – Part A
ASR240
QSR240
Non-life technical provisions by line of business – Part B
ASR241
N/A
Non-life gross best estimate by country
ASR242
N/A
Assets and liabilities by currency
ASR260
N/A
Life technical provisions
ASR280
QSR280
Life gross best estimate by country
ASR281
N/A
Health SLT technical provisions
ASR283
QSR283
Health SLT gross best estimate by country
ASR284
N/A
Minimum capital requirement – Non-life
ASR510
QSR510
Minimum capital requirement – Life
ASR511
QSR511
Solvency Capital Requirement – for syndicates on full internal
models
ASR522
N/A
Form Description
AAD Reference
QAD Reference
Investment data – portfolio list
AAD230
QAD230
Derivatives data – open positions
AAD233
QAD233
Investment funds (look-through approach)
AAD236
QAD236
1.5.5
This document provides instructions to managing agents in respect of completion of the above
returns which have been developed in the CMR. The forms specifications have also been uploaded
onto the respective sections of the CMR.
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1.6
Qualitative requirements
1.6.1
Managing agents will be required to be submit a qualitative report as at 31 December 2014 and the
deadline for submission is the same as that of quantitative reporting above. This should be as per
section 5 of the instructions.
1.7
Confidentiality of information
1.7.1
The information provided by managing agents to comply with these interim reporting requirements
shall remain confidential to Lloyd’s and the PRA; no information shall be made public by Lloyd’s.
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Section 2: General instructions
The following instructions are common to the all of the interim Pillar 3 returns.
2.1
Pillar 3 returns
2.1.1
The Pillar 3 returns required to be submitted by syndicates as at 31 December 2014 and 30
September 2015 are based on Solvency II preparatory templates issued by EIOPA in July 2014 as
part of the XBRL taxonomy package, but tailored where necessary to cover areas of relevance to
Lloyd’s syndicates.
2.1.2
The asset data should be reported in the AAD with all the rest of the Solvency II information reported
in the ASR.
2.1.3
The ASR is a synchronous return, similar to the QMA, while AAD is an asynchronous return due to
the high volume of data required.
Synchronous
This has been the standard approach used for returns with relatively low volume of data, for
example, QMA. Below are some of the features:
 data can be input to CMR either through the user interface or in csv format
 data submitted in csv format can be edited via the user interface
 validations are done as and when the data is input
 all data can be printed
Asynchronous
This approach has been used for returns with high volume of data, for example, PMD/GQD/TPD
returns. Below are some of the features:

data is input to CMR as a series of zipped csv files

edits to the data are made by updating the csv and re-uploading it

validations are done when the data is uploaded

prior to submission, a validation tool is provided to pre-process the data for format compliance

summary data can be printed
2.1.4
A managing agent’s report (ASR910 and AAD910) must be also be completed for each of the ASR
and AAD respectively. The relevant formats are provided as Appendix 3 to these instructions.
2.1.5
No audit is required.
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2.2
Reporting timetable
2.2.1
Timetable: The following table provides the deadlines for Pillar 3 submissions. The electronic version
of the completed return is required to be submitted by the managing agent to the Core Market
Returns site by 2pm of the relevant submission date.
Quarter
Submission date
Audited?
Type of submission
Q4 2014
Thursday 16 April 2015
No
Electronic only*
Q3 2015
Thursday 5 November 2015
No
Electronic only*
(*NB: Hard copies of the Pillar 3 returns are not required, however, hard copies of the signed
managing agent’s reports (ASR910 and AAD910) are required to be submitted to Lloyd’s by the
designated deadline).
The managing agent’s reports should be sent to:
Paul Appleton
Market Finance
Gallery 5
Lloyd’s 1986 Building
One Lime Street
London EC3M 7HA
There is no reception area on Gallery 5 so hard copies that are to be delivered by hand must be
taken to the “tenants and courier” office which is located on the lower ground floor on the left hand
side of the Lloyd’s building when viewed from Lime Street.
2.2.2
Late submissions: Failure to submit the returns by the due deadline will be considered a breach of the
Solvency and Reporting Byelaw (No.5 of 2007), as amended. A resubmission of the returns after the
deadline date will be considered a late submission.
Where a managing agent has reason to believe that it may be unable to submit the return on time it
is encouraged to contact Lloyd’s Market Finance at the earliest opportunity in advance of the
deadline to discuss the matter. Failure to do so will be a factor Lloyd’s will take into account in
deciding whether a fine is appropriate.
If an inaccurate or incomplete submission has been submitted then Lloyd’s may at its discretion
regard that submission as being “late” in which case a fine may be imposed. In deciding whether to
exercise that discretion Lloyd’s Market Supervision and Review Committee (MSARC) will have
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regard to whether the managing agent itself identified the inaccuracy and brought the matter to
Lloyd’s attention at the earliest opportunity.
Where Lloyd’s is satisfied that a fine is appropriate then the following fining regime will be applied:
Per return per syndicate – flat fine
£5,000
Per return per syndicate – additional fine per working day late
£1,000
Persistent delays will lead to further disciplinary action.
Please note that in accordance with the above policy Lloyd’s will take disciplinary action against
managing agents who fail to submit market returns on time and fines will be imposed in appropriate
circumstances, a policy supported by MSARC.
2.3
Key contacts
2.3.1
Any queries about the completion of the Pillar 3 returns should be directed by e-mail to Market
Finance at [email protected]. All queries will be responded to by the end of the
following working day. Please contact Paul Appleton ([email protected]) via email if a
response remains outstanding at that time.
2.3.2
Please include the relevant form number(s) and a reference to the issue raised in the email header.
2.3.3
The key contacts within the Corporation of Lloyd’s in relation to the Pillar 3 returns are:
Paul Appleton
Senior Manager, Accounting Policy
George Maina
Project Manager, Accounting Policy
Jane Tusar
Project Executive, Accounting Policy
2.4
Overview of return
2.4.1
Parallel corporate syndicates must complete and submit separate Pillar 3 returns.
2.4.2
The return must be completed in respect of all open years of account and all run-off years of
account, in order to reflect the total insurance business transacted by underwriting members of
Lloyd’s.
2.4.3
When setting up a return, the system will generate the forms to be completed, and establish the
validation rules to be adhered to, as appropriate to that syndicate’s circumstances.
2.5
Basis of preparation
2.5.1
The returns must be prepared in accordance with these instructions. Where additional clarification is
required this will be issued via Frequently Asked Questions posted on the CMR website. This will
clearly set out whether the update is a change to the instructions or for guidance purposes only.
2.5.2
The return must be prepared in accordance with the Solvency II Directive, Level 2 Implementing
Measures and Level 3 Technical Guidance as issued by EIOPA, except where an alternative
treatment is specifically required in the instructions.
2.5.3
The instructions in respect of each form state the level at which the forms should be completed.
Each form must be completed at one of the following levels:
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
Whole syndicate (all reporting years combined)

Reporting year

Pure/Underwriting year
2.5.4
Whole syndicate or all reporting years combined means all of the transactions or assets and
liabilities as appropriate for the syndicate as a whole.
2.5.5
Reporting year means the calendar year that is being reported, for example, when reporting for the
year end 2014, the reporting year will be 2014.
2.5.6
Pure/Underwriting year relates to the year in which the business was originally written and to which
the original premiums and all subsequent transactions are signed. The pure original year may still be
open, or subsequently reinsured to close into another year of account. For general (non-life)
business the pure original year may be from the 1993 to the 2014 year of account, all liabilities in
respect of 1992 and prior years having been reinsured into Equitas effective at 31 December 1995.
When reporting on the transactions for a pure original year, only the transactions relating specifically
to that pure year must be reported.
2.6
Exchange rates
2.6.1
All figures are to be provided in GBP. A market bulletin will be issued on the next working day
following each quarter end providing suggested, but not mandatory, average and closing rates.
2.6.2
For the profit and loss account, all conversions will normally be made using exchange rates at the
dates of the transactions (or at average rate for the period when this is a reasonable approximation)
as defined under IAS 21, The Effects of Changes in Foreign Exchange Rates. Lloyd’s will not
prescribe the actual rates to be used.
2.6.3
For the balance sheet, conversions must be made using closing rates of exchange in accordance
with IFRS. Non-monetary items (if any) should be treated in the ASR as per IAS 21. IAS 21 requires
the following at the end of each reporting period:

Foreign currency monetary items should be translated using the closing rate

Non-monetary items that are measured in terms of historical cost in a foreign currency should be
translated using the exchange rate at the date of the transaction

Non-monetary items that are measured at fair value in a foreign currency should be translated
using the exchange rates at the date when the fair value was measured
2.6.4
Solvency II requires that all assets and liabilities should be measured at fair value, hence all foreign
currency assets and liabilities should be translated at closing rate.
2.7
Reporting configuration
2.7.1
All forms are to be completed in currency units, not 000's, unless specified on the form. Generally, all
values must be entered as positive numbers unless otherwise stipulated on the forms and
instructions
2.8
Completion of forms
2.8.1
All amounts on each form must be completed as indicated on the form. Additional guidance is
provided in respect of each form in these instructions.
2.8.2
Certain figures disclosed on some forms in the return must agree or relate to figures on other forms.
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2.8.3
The Pillar 3 returns must be prepared on the same underlying data as used in the preparation of the
QMA. In other words, no adjustment is made in respect of post balance sheet events in the returns
unless such an adjustment has already been made in accordance with UK GAAP for the purpose of
the QMA (and thus the syndicate accounts). Furthermore, any adjustments made to technical
provisions for Solvency II purposes shall be based on the underlying technical provisions as reported
in the QMA.
2.9
‘Analysis’ cells
2.9.1
Certain cells require analysis of material amounts to be provided in the analysis section (i.e. a
description and details of the material amount must be disclosed). For such items, the system will
generate a sequentially numbered continuation sheet. Where we have identified common reasons for
an ‘other’ entry, use the suggested description in the analysis section where appropriate.
2.9.2
Any amount greater than £1m must be given a description that is sufficient for the reader to
understand its nature. General terms such as “other,” “miscellaneous,” etc. should not be used for
amounts greater than £1m. Descriptions given to amounts below £1m will be at the discretion of the
agent and auditor given the circumstances of the syndicate and the nature of the analysis figure.
2.10
Equitas
2.10.1 The Pillar 3 returns must be prepared on a basis of recognising the reinsurance to close of all 1992
and prior non-life business into Equitas, effective as at 31 December 1995. In particular, only
transactions, assets and liabilities relating to 1993 and post non-life business (and ALL life business)
must be reported in the return. Any transactions occurring in the current year relating to 1992 and
prior non-life business must NOT be reported in this return.
2.11
Quarterly Monitoring Return part C (QMC)
2.11.1 Syndicates are currently required to submit a QMC and this is used for capital setting/release tests at
Lloyd’s. This return will still be required to be submitted and specific instructions for completion
can be found on the CMR website.
2.12
Scope of these instructions
2.12.1 The instructions below are specifically for completion of the ASR and AAD returns which are
required for the year ending 31 December 2014. Instructions for the Q3 2015 interim reporting will
be issued in Q2 2015.
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Section 3: form instructions for ANNUAL SOLVENCY RETURN
3.1
ASR 010: Control page
Purposeofform: This form collects/confirms basic information regarding the syndicate, including the
syndicate number, managing agent, reporting years of account and their status (open/closed/run-off) and
pure years comprising each reporting year.
The software will generate the forms required to be completed in accordance with the data in the matrix. It is
important that you check that the matrix is populated correctly.
When you set up a return, you are required to enter a person as the contact for the return. Any queries on the
return will be addressed to this person together with the person who clicks the action “sign off” prior to
submission of the return.
Each syndicate will have a return Administrator. The Administrator is responsible for adding/amending
contact details for the return. Please ensure that all contact details are correct. Details can be updated via the
‘Admin’ link on the Core Market Returns menu.
We do recognise, however, that the persons signing off the return may not necessarily be those to whom
queries should be sent to. If this is the case, please email Market Finance via [email protected], with details of an alternative contact, who shall be included on the queries
distribution list relating to the syndicate.
3.2
ASR 026: Additional Material Currency Selection
Purposeofform: This form allows syndicates to select additional material currencies required on ASR260.
This form allows syndicates to select additional currencies required in ASR260 i.e. other than the 6
currencies (USD, GBP, EUR, CAD, AUD and JPY) already presented in ASR260. Syndicates are required to
report separately any additional currencies that represent 20% or more of both assets and liabilities.
3.3
ASR 002: Overall Balance Sheet
Purposeofform: This form presents an overall view of the balance sheet of the syndicate under Solvency II
valuation rules, compared with UK GAAP.
This form is required for all reporting years combined.
The amounts in Column A will be valued based on Solvency II valuation principles while those in Column B
will be on a UK GAAP basis. The Solvency II amounts reported in column A are expected to be positive but
there are cases where these amounts can be negative and this is mainly in respect of technical provisions
best estimate i.e. where the cash in-flows is greater than cash out-flows. Please see Appendix 2 for the
mapping of Solvency II balance sheet to QMA002, but this is only a guide and syndicate should ensure that
amounts are reported within the correct balance sheet lines.
The UK GAAP amounts as reported in column B are expected to be positive and must agree to the
disclosure in the syndicate annual accounts and QMA002, Column C or, where fewer lines/different names
are used in the accounts/QMA, it should be possible to agree the figures in total.
Assets
Solvency II amounts reported in the balance sheet should be valued at fair value, for example, investments
should be valued using one of the following valuation methods:

Quoted market price in active markets for the same assets
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
Quoted market price in active markets for similar assets

Other alternative valuation methods
The amounts reported in this form, for those assets that are required to be reported in the AAD230/233,
should agree with the total Solvency II amount. To assist in the reconciliation between this form and the
AAD230/233, a play back summary has been developed and is based on the lines on the balance sheet.
Hence syndicate should ensure that the amount reported in this form agrees with the amount presented in
the AAD230s (play back summary).
Line A1 - Goodwill: This is valued nil under Solvency II
Line A2 – Deferred acquisition costs: There are no deferred acquisition costs under Solvency II as all
acquisition costs not received by the reporting date are included in the calculation of technical provisions.
Hence, no amount is expected within A2.
Line A3 – Intangible assets: These are intangible assets other than goodwill. They should be valued at nil
under Solvency II valuation principles, unless they can be sold separately and the syndicate can demonstrate
that there is a market value for the same or similar assets that has been derived in accordance with Level 2
implementing measures.
Line A4 – Deferred tax assets: This is an asset that may be used to reduce any subsequent period's income
tax expense. Deferred tax assets can arise due to net loss carry-overs, which are only recorded as assets if it
is deemed more likely than not that the asset will be used in future fiscal periods (i.e. where it is probable that
future taxable profit will be available against which the deferred tax asset can be utilised). We do not expect
syndicates to report any amount within this line since tax would apply at member level.
Line A5 – Pension benefit surplus: This is net surplus related to staff pension scheme, if applicable. We
would not expect syndicates to report any amount within this line.
Line A6 – Property, plant & equipment held for own use: These are tangible assets which are intended for
permanent use and property held by the undertaking for own use, but Lloyd’s would not expect any amount to
be reported within this line. The amount reported within this line should agree with the total Solvency II
amount reported in AAD230 with a CIC of XT93 and XT95.
Line A7 - Property (other than for own use): This is investment property and Lloyd’s is not expecting any
amount to be reported within this line. Where a syndicate has investment in funds investing in real estates,
this should be reported within line A21, real estate funds. The amount reported within this line should agree
with the total Solvency II amount reported in AAD230 with a CIC of XT91, XT92, XT94 and XT99.
Line A8 – Participations: This is defined in article 13(20) of the Solvency II Directive as “ownership, direct or
by way of control, of 20% or more of the voting rights or capital of an undertaking”. Lloyd’s does not expect
syndicates to have any participations, hence no amount is expected within this line.
Line A9 – Equities-listed: These are shares representing corporations’ capital, e.g. representing ownership in
a corporation, listed on a public stock exchange. The amount reported within this line should exclude
participations and should agree with the total Solvency II amount reported in AAD230 with a CIC category 3#,
excluding XL3#, XT3#.
Line A10 – Equities –unlisted: These are shares representing corporations’ capital, e.g. representing
ownership in a corporation, not listed on a public stock exchange. The amount reported within this line should
exclude participations and should agree with the total Solvency II amount reported in AAD230 with CIC
categories of XL3# and XT3#.
Line A12 – Government Bonds: These are bonds issued by public authorities, whether by central
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government, supra-national government institutions, regional governments or municipal governments. The
amount reported within this line should agree with the total Solvency II amount ( market value plus accrued
interest) reported in AAD230 with a CIC category of ##1#.
Line A13 – Corporate Bonds: These are bonds issued by corporations including those issued by government
agencies, for example, Federal National Mortgage Association (Fannie Mae) and Federal Home Loan
Mortgage Corporation (Freddie Mac). The amount reported within this line should agree with the total
Solvency II amount (market value plus accrued interest) reported in AAD230 with a CIC category of ##2#.
Line A14 – Structured notes: These are hybrid securities, combining a fixed income instrument with a series
of derivative components. Excluded from this category are fixed income securities that have been issued by
sovereign governments. These are all securities that have embedded all categories of derivatives, including
Credit Default Swaps (CDS), Constant Maturity Swaps (CMS) and Credit Default Options (CDO). The
amount reported within this line should agree with the total Solvency II amount (market value plus accrued
Line A15 – Collateralised securities: These are securities whose value and payments are derived from a
portfolio of underlying assets. These include Asset Backed securities (ABS), Mortgage Backed securities
(MBS), Commercial Mortgage Backed securities (CMBS), Collateralised Debt Obligations (CDO),
Collateralised Loan Obligations (CLO) and Collateralised Mortgage Obligations (CMO). The amount reported
within this line should agree with the total Solvency II amount (market value plus accrued interest) reported in
AAD230 with a CIC category of ##6#.
Lines A17 - A25 – Investment funds: These should include all the funds (including money market funds) that
are held by the syndicate. Overseas trust funds that are managed by Lloyd’s should also be reported as
investment funds and the type of fund should be based on the CIC reported in AAD230. For example, where
the CIC is reported as 42, then this should be reported in the balance sheet within debt funds. The amounts
reported within these lines should agree with the total Solvency II amount reported in AAD230 as follows:

Equity funds – CIC ##41

Debt funds – CIC ##42

Money market funds – CIC ##43

Asset allocation funds – CIC ##44

Real estate funds – CIC ##45

Alternative funds – CIC ##46

Private equity funds – CIC ##47

Infrastructure funds – CIC ##48

Other – CIC ##49
Line A27 – Derivatives: Only derivative assets should be included on this line i.e. those with positive values.
These should be derivative assets that are directly held by the syndicate and hence do not include those that
are held indirectly through investments funds or structured notes. The amount reported within this line should
agree with the total Solvency II amount reported in AAD233 with a CIC of A to F (where the value is positive).
Line A28 - Deposits other than cash and cash equivalents: These are deposits other than transferable
deposits. These means that they cannot be used to make payments at any time and that they are not
exchangeable for currency or transferable deposits without any kind of significant restriction or penalty. The
amount reported within this line should agree with the total Solvency II amount reported in AAD230 with CIC
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XT73, XT74 and XT79.
Line A29 – Other investments: This cell is an analysis cell. All material amounts included in this cell must be
separately listed in the analysis table (see section 2.9 ‘analysis cell’ above for details of materiality).
Line A31 – Assets held for unit-linked & index-linked funds: These are assets held for insurance products
where policyholder bears the risk (unit-linked). Lloyd’s would not expect any amount reported within this line.
Line 32 – Loans & mortgages to individuals: These are financial assets created when creditors lend funds to
debtors - individuals, with collateral or not, including cash pools.
Line 33 – Other loans & mortgages: These are financial assets created when creditors lend funds to debtors
- others, not classifiable as loans & mortgages to individuals, with collateral or not, including cash pools.
The amount reported within lines 33 and 34 should agree with the total Solvency II amount reported in
AAD230 with CIC of XT81, XT82, XT84, XT85 and XT89.
Line A34 – Loans on policies: These are loans to policyholders collateralised on policies. We do not expect
syndicates to have this type of asset. The amount reported within this line should agree with total amount
reported in AAD230 with a CIC of XT86.
Lines 36 & 37 – Reinsurance recoverables (Non-life excluding health and health similar to non-life):
Reinsurers’ share of technical provisions relating to non-life and health similar to non-life should be reported
within the appropriate lines. The total amount of these two lines should agree to the recoverable from RI/SPV
after adjustment for expected losses due to default reported in ASR240, Q29.
Line 39 - Reinsurance recoverables (Health similar to life): Reinsurers’ share of technical provisions relating
to health similar to life should be reported within this line. This amount should agree to the recoverable from
RI/SPV after adjustment for expected losses due to default reported in ASR283, F7.
Line 40 - Reinsurance recoverables (Life): Reinsurers’ share of technical provisions relating to life should be
reported within this line. This amount should agree to the recoverable from RI/SPV after adjustment for
expected losses due to default reported in ASR280, I7.
Line 42 – Life index-linked and unit-linked: Reinsurers’ share of technical provisions relating to life indexlinked and unit-linked should be reported within this line. Syndicates do not write this type of business hence
no amount is expect to be reported within this line.
Line 44 – Deposits to cedants: These are deposits relating to reinsurance accepted and should agree with
the amount reported in AAD230 with a CIC of XT75.
Line 45 – Insurance & intermediaries receivables: These are amounts due by policyholders, intermediaries,
other insurers, and linked to insurance business, but that are not included in cash-in flows of technical
provisions. Includes also amounts overdue by policyholders and insurance intermediaries (e.g. premiums due
but not yet received).
Line 46 – Reinsurance receivables: These are amounts due by reinsurers and linked to reinsurance
business, but that are not reinsurance recoverables (RI share of technical provisions). It may include;
creditors from reinsurers that relate to settled claims of policyholders or beneficiaries and payments in
relation to other than insurance events or settled insurance claims.
Line 47 – Receivables (trade, not insurance): Includes amounts owed by employees or various business
partners (not insurance-related), incl. public entities (no reason to have separate lines for current tax assets).
Line 48 – Own shares: These are own shares held by the undertakings. Syndicates do not have shares,
hence no amount is expected within this line.
15
Line 49 – These are amounts due in respect of own fund items or initial fund called up but not yet paid in:
This would mainly relate to Funds in Syndicate (FIS) that has been called up but had not been paid by year
end. We do not expect syndicates to have any unpaid FIS, hence no amount is expected within this line.
Line A50 – Cash and cash equivalents: These are notes and coins in circulation that are commonly used to
make payments, and deposits exchangeable for currency on demand at par and which are directly usable for
making payments by cheque, draft, giro order, direct debit/credit, or other direct payment facility, without
penalty or restriction. These are amounts classified with CIC codes, XT71 and XT72.
Line A51 – Any other assets, not elsewhere shown: This cell is an analysis cell. All material amounts
included in this cell must be separately listed in the analysis table (see section 2.9 ‘analysis cell’ above for
details of materiality).
Liabilities
Technical provisions
These should be valued in accordance with Lloyd’s Solvency II guidance titled “Technical Provisions under
Solvency II Detailed Guidance (March 2011 update)”. These instructions can be accessed through the
following link: Link to Technical Provisions Guidance.
There have previously been some areas of uncertainty relating to the calculation of technical provisions on a
Solvency II basis and the key ones included: binary events, contract boundaries for binding authorities and
allowance for reinsurance on future business. Lloyd’s has received clarification on two of these, binary events
and contracts boundaries for binding authorities, more details are given below. Uncertainty remains as to the
treatment of outwards reinsurance on future business, Lloyd’s is seeking further clarification on this. For
each of the three areas above Lloyd’s anticipates updating its Technical Provisions Guidance in early 2015.
Binary events
It’s requirement to take account of all possible future outcomes when calculating Solvency II basis technical
provisions. The difference in basis between the UK GAAP ‘reasonably foreseeable’ and Solvency II ‘all
outcomes’ is commonly referred to as allowance for events not in data (ENID) or binary events. Managing
agents are expected to justify their approach in respect of their own data as well as nature and uncertainty
inherent in their business.
Contract boundaries for binding authority contracts
EIOPA’s Guidelines on Contract Boundaries (para 2.16) notes: “A need to reassess the contract boundaries
can arise, where a delegated underwriting authority or binder exists which can sign business on behalf of the
undertaking. The undertaking requires information on the underlying insurance contracts written within the
binder to assess the contracts which fall within the contract boundary at a given valuation date. If this
information is not available, estimates will need to be made.”
Therefore, syndicates will need to carry out a look-through process to identify the underlying contracts that
are written (including bound but not incepted) within the reporting period. Reasonable approximations for the
look-through approach can be made. Estimates of contracts entered into can be based on historical
experience of specific binders and/or the terms and conditions of the binder to assess the number of
contracts likely to be entered into and likely corresponding cash-flows. Where the syndicate has not received
information of the contracts entered into, an estimate will need to be made.
The treatment of the binding authority as the ‘contract’ in this regard is not appropriate (e.g. through the use
of cancellation periods of the binder). As binding authorities are not contracts of (re)insurance a look-through
to the underlying contracts (or reasonable approximation) is required.
16
Risk margin
Calculation of the risk margin as at 31 December should be based on the final SCR submitted to Lloyd’s in
September via the Lloyd’s Capital Return (LCR), plus any capital add-on notified by Lloyd’s by 31 December.
However, if a revised SCR has been produced then this should be used. The SCR to be used for the
calculation of the risk margin is the ‘one year’ SCR, not the SCR to ultimate and should be based on current
obligations on the balance sheet only (i.e. not allow for business to be written in future not included on the
Solvency II balance sheet).
In discounting technical provisions as at 31 December, managing agents should use the risk free yield curves
published by Lloyd’s in early January. However, where EIOPA has issued the risk free yield curves, these
should be used. Where Lloyd’s’/EIOPA publishes the risk free yield curves, a link will be provided on the
Lloyd’s website.
The ‘Solvency II value of the technical provisions’ should be reported in the respective line, i.e. risk margin
and best estimate while the UK GAAP statutory accounts value should be reported on the “Technical
Provisions calculated as a whole” line.
Technical Provisions calculated as a whole: Separate calculation of the best estimate and risk margin are
not required where the future cash-flows associated with insurance obligations can be replicated using
financial instruments for which a market value is directly observable. The portfolio must be
replicable/hedgeable. Lloyd’s does not expect syndicates to calculate technical provisions as a whole,
however, where a syndicate has transferred its liabilities to another syndicate through RITC and the technical
provisions transferred cannot be split into best estimate and risk margin, the price payable can be considered
to be the market price of the technical provisions and hence should be reported within “technical provisions
calculated as a whole”.
The amounts reported within the technical provisions lines (53 to 68) should agree with the amounts reported
in the non-life, life and health technical provisions forms (ASR240, 280 and 283 respectively) as shown in the
table below:
ASR002 Reference
ASR240/280/283 Reference
Sum of lines 53 and 57
ASR240, Q1
ASR240, Q25
ASR240, Q27
Line 61
ASR283, F1
Line 62
ASR283, F2
Line 63
ASR283, F9
Line 65
ASR280, I1
Line 66
ASR280, I2
Line 67
ASR280, I9
17
Lines 69-72 – Technical provisions – index linked and unit linked: Syndicates do not write this type of
business, hence no amount is expected to be reported within these lines.
Line 73 – Other technical provisions: These are other technical provisions arising from UK GAAP. This line
should be nil for Solvency II column.
Line 74 – Contingent liabilities: These are liabilities that are contingent, therefore off-balance sheet according
to IAS 37, Provisions, Contingent Liabilities and Contingent Assets. The standard defines a contingent liability
as:
(a) A possible obligation that arises from past events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the
entity; or
(b) A present obligation that arises from past events but is not recognised because:
(i) it is not probable that an outflow of resources embodying economic benefits will be required to settle
the obligation; or
(ii) the amount of the obligation cannot be measured with sufficient reliability.
These are neither related to insurance, nor financing nor lease; they are, for example, related to legal
expenses (with an expected probability of less than 50%).
Line 75 – Provisions other than technical provisions: These are liabilities of uncertain timing or amount, for
example, provisions for legal expenses or deferred income reserve.
Line 76 – Pension benefit obligations: These are net obligations related to staff pension scheme, if applicable
according to pension system.
Line 77 – Deposits from reinsurers: These are amounts received from reinsurer or deducted by the reinsurer
according to the reinsurance contract.
Line 78 – Deferred tax liabilities: A tax liability that a company owes and does not pay at that current point,
although it will be responsible for paying it at some point in the future. These are tax liabilities that are a result
of temporary differences between the accounting and tax carrying values, the anticipated and enacted
income tax rate, and estimated taxes payable for the current year. In simple terms, it is tax that is payable in
future. We do not expect syndicates to report any amount within this line since tax would apply at member
level.
Line 79 – Derivatives: Only derivative assets should be included on this line i.e. those with negative values.
These should be derivative liabilities that are directly held by the syndicate and hence do not include those
that are held indirectly through investments funds or structured notes. The amount reported within this line
should agree with the total Solvency II amount reported in AAD233 with a CIC of A to F (where the value is
negative).
Line 80 - Debts owed to credit institutions: These are debts, such as mortgage and loans that are owed to
credit institutions, for example, banks. This excludes bonds being held by credit institutions, since it is not
possible for the undertaking to identify all the holders of the bonds it issues. Subordinated liabilities should
not be included here.
Line 81 – Financial liabilities other than debts owed to credit institutions: This includes bonds issued by the
undertaking (whether they are held by credit institutions or not), and mortgage and loans due to other entities
than credit institutions. This includes structured notes issued by the undertaking itself (not by SPV).
Subordinated liabilities should not be included here.
18
Line 82 – Insurance & intermediaries payable: These are amounts due to policy holders, other insurers, and
linked to insurance business. This would relate to amounts that not been transferred to technical provisions
i.e. over-due amounts. This includes amounts due to (re)insurance intermediaries (e.g. commissions due to
intermediaries but not yet paid by the syndicate).
These excludes loans & mortgages due to insurance companies, if they are not linked to insurance business
but are only related to financing (and are therefore included in financial liabilities).
Line 83 – Reinsurance payables: These are amounts due to reinsurers other than deposits and linked to
reinsurance business, but that are not included in reinsurance recoverables i.e not transferred to RI share of
technical provisions. These includes debtors to reinsurers that relate to settled claims of policy holders or
beneficiaries.
Line 84 – Payables (trade, not insurance): This includes amounts due to employees, suppliers, etc. and not
insurance-related, similar to receivables (trade, not insurance) on asset side; includes public entities.
Line 85 – Subordinated liabilities not in BOF: These are debts which rank after other debts when company is
liquidated, only subordinated liabilities that are not classified in basic own funds (BOF) should be presented
here. We do not expect syndicates to report any amounts within this line.
Line 86 – Subordinated liabilities in BOF: These are debts which rank after other debts when company is
liquidated, only subordinated liabilities that are classified in BOF should be presented here. We do not expect
syndicates to report any amounts within this line.
Line 87 – Any other liabilities, not elsewhere shown: This includes any liabilities not included in the other
balance sheet items.
Other areas
Future cash flows transferred from (re)insurance receivables/payables to technical provisions
Solvency II requires transfer of future cash flows from (re)insurance receivables/payables to technical
provisions. Amounts included in (re)insurance receivables/payables that are not “over-due” should be
transferred to technical provisions as future cash flows. Agents should ensure that adjustments made to
(re)insurance receivables/payables in relation to future cash flows agree to respective amounts included in
the calculation of the technical provisions and reported in the technical provision data return (TPD). We
would not expect any adjustments against reinsurance receivables in respect of recoverable on paid claims
as these amounts should be left as debtors in the balance sheet.
LCA balances
LCA balances are future cash flows and hence should be included in the Technical Provisions. However, any
amount included in the LCA balances where the contractual settlement due date has passed by the period
end date but which at the period end date have not been received should be reported as debtors in ASR002.
From a premium stand point the agent needs to consider what has been received. If the agent is notified of a
premium signing which has not yet been settled and has a due date after the balance sheet date then this is
a future cash flow and should be reported in technical provisions. This remains as a future cash flow in
technical provisions until the cash is received by the syndicate.
From a claims standpoint, the managing agent will know when a claim has been paid and can deem the cash
flow as having occurred. If it is reported in LCA balances once paid at the balance sheet date then it should
be left in creditors on the balance sheet i.e. should not be considered a future cash flow in technical
provisions.
19
In summary, managing agents need to consider the cash flow between the syndicate and LCA and decide if it
is a future cash flow from the syndicate's perspective.
Reinsurance recoveries
The key defining characteristic is when the reinsurance recoveries in question are booked as "paid" (i.e. the
moment they would appear in the QMA/financial statements as "debtors arising out of reinsurance
operations/reinsurance receivables” in the balance sheet and “reinsurers’ share of paid claims" in the P&L
account). If, for any reason, the processing of reinsurance recoveries results in a mis-match to the gross
payment (e.g. there is a delay in calculating and processing outwards amounts to "paid") then the
unprocessed expected reinsurance recoveries would remain as outstanding (unsettled) reinsurance claims
for a period of time. As with the current treatment, these recoveries would remain within technical provisions
for Solvency II until this is processed as paid (and collection notices issued). For most agents, this would be
the same as the current financial reporting/accounting basis. For the avoidance of doubt, any uncollected
reinsurance recoveries in respect of reinsurance items booked as "paid" are not reported as technical
provisions but as debtors. Hence, on ASR002, we would not expect any adjustments (relating to claims paid)
within line 46 ‘Reinsurance receivables’ to technical provisions. The same principles would apply to any
associated reinstatement or outwards adjustment premiums.
This is consistent with the principle of correspondence in that technical provisions only include the expected
reinsurance cash flows that relate to the expected (unsettled) gross claims on current obligations but
recognising that, in practice, some reinsurance recoveries will see a lag between the gross and reinsurance
claims being calculated and/or processed.
Other assets and other liabilities
These should be valued at fair value by discounting expected cash flows using a risk free rate. However,
book value as per UK GAAP may be used as a proxy to the fair value for Solvency II balance sheet purposes
where the impact of discounting is not material because the balances are due/payable within one year or
amounts due/payable in more than one year are not material. Materiality should be determined in accordance
with International Accounting Standards (IAS1) i.e. “Omissions or misstatements of items are material if they
could, individually or collectively, influence the economic decisions that users make on the basis of the
financial information. Materiality depends on the size and nature of the omission or misstatement judged in
the surrounding circumstances.”
Profit commission
Where the profit under Solvency II would be different to that under UK GAAP, agents should recalculate the
profit commission to reflect the change in the profit. Hence, the profit commission recognised in the Solvency
II column should be based on the Solvency II profit.
However, where the syndicate year is closing, there is no recalculation of the profit commission in respect of
the closing year as distribution will be based on the QMA (UK GAAP result). However, the effect of Solvency
II valuation differences on the liabilities accepted by the reinsuring year of account, either for the same or
another syndicate, should be taken into account when calculating the notional Solvency II profit commission
for the reinsuring syndicate year.
Funds in syndicate (FIS)
Where a syndicate holds FIS, this should be reported within the respective investments lines i.e. ASR002,
lines 7-29. The amount reported within these lines should agree with the respective total Solvency II amounts
reported in the AAD230.
20
3.4
ASR220: Own Funds
Purposeofform: This form provides a detailed overview of the syndicate’s own funds.
The syndicate should report funds in syndicate (FIS) in this form but funds at Lloyd’s (FAL) should be
excluded. All items of own funds should be reported in Tier 1. If the managing agent considers that this is not
appropriate, it should contact Lloyd’s,
Line 1 – Members’ contributions: This is the amount of capital contributed by and held by syndicates. Only
FIS should be reported on this line. FIS is Tier 1 (unrestricted), hence we would expect that only B1 is
completed.
Line 2 – Reconciliation reserve: The reconciliation reserve represents reserves (e.g. retained earnings), net
of adjustments (e.g. foreseeable distributions). It also reconciles differences between the accounting
valuation and Solvency II valuation. In the case of syndicates, the value on this line will equal members’
balances, less foreseeable distributions and FIS (if applicable).
Line 3 – Other items approved by supervisory authority as basic own funds not specified above: This is the
total of any items of basic own funds not identified above. We don’t expect syndicates to have any amount
reported within this line.
Line 5 – Total available own funds to meet the SCR: This is the total own funds of the syndicate, comprising
basic own funds after adjustments plus ancillary own funds, that are available to meet the SCR. In the case
of syndicates, this is the total amount of basic own funds.
Line 6 – Total available own funds to meet the MCR: This is the total own funds of the syndicate, comprising
basic own funds, that are available to meet the MCR.
Line 7 – Total eligible own funds to meet the SCR: At least 50% of the SCR should be covered by Tier 1 own
funds and a maximum of 15% may be covered by Tier 3. Also, restricted Tier 1 eligible funds to cover SCR
cannot be more than 20% of the total Tier 1 funds used to cover SCR. The balance of the restricted Tier 1
funds may be included as Tier 2 funds. Lloyd’s expect that all syndicates’ own funds would fall under
unrestricted Tier 1 funds.
Line 8 – Total eligible own funds to meet the MCR: At least 80% of the MCR should be covered by Tier 1
eligible own funds with the balance being covered by Tier 2 basic own funds.
Line 9 – Solvency Capital Requirement (SCR): This is the total SCR of the syndicate and should correspond
to SCR amount reported in ASR522, line 10.
Line 10 – Minimum Capital Requirement (MCR): This is the MCR of the syndicate and should correspond to
the total MCR disclosed in ASR510, A24 or ASR511, A13 for non-life and life syndicates respectively.
Line 13 – Excess of assets over liabilities: This amount should agree to the excess of assets over liabilities
amount reported in ASR002, A89.
Line 14 – Foreseeable distributions: This is the amount of distribution that has been approved by the
managing agent’s Board but has not been made by the reporting date. Hence at the end of Q4, profit from
the closing year should be reported within this line. For example, assuming that the reporting date is 31
December 2014 and the syndicate has 2012, 2013 and 2014 years of account, the expected distribution for
2012 should be reported within this line. The same treatment should be applied on the expected open year
profit release, i.e. on the 2013 and 2014 reporting years.
21
Open/run-off years
Open/run-off year profit release should be based on the lower of the syndicate UK GAAP solvency result as
per QMA005, line 7 and Solvency II net balance i.e. QMC002 column C line 55 to 64 for the relevant
reporting year of account. Where the UK GAAP solvency result has been improved by a positive adjustment
to reflect exchange differences on technical provisions for solvency in respect of non-monetary items
(QMA005 line 2) then this element of the result is not available for release.
The lower amount determined as per above should be reported within line 14, foreseeable distributions.
However, this should only be where the syndicate is planning to have an open/run-off year profit release i.e
has indicated “NO” on QMA101 and has provided a signed QMA923 for the respective open year(s).
Closed year
Closed year profit release should be based on the syndicate’s UK GAAP result as per QMA360, A5, but
adjusted for “three year funded adjustments” as per QMA102, D54. This amount should be reported within
line 14, foreseeable distributions.
Line 15 – Other basic own fund items: This is the sum of “members’ contributions (Funds in syndicate – FIS)
(line 1)” and “other items approved by supervisory authority as basic own funds not specified above (line 3)”.
Line 16 – Restricted own fund items due to ring fencing: We do not expect any amounts reported within this
line.
Line 18 & 19 – Expected profits included in future premium (EPIFP) – Life/non-life: These are the expected
profits included in future premiums and that are recognised in technical provisions. Only one line is expected
to be completed i.e. either line 18 or line 19 for life and non-life respectively. However, where a non-life
syndicate has annuities stemming from non-life insurance contracts, line 18 should also be completed with
EPIFP from these insurance contracts.
The following is the definition of EPIFP split between incepted and unincepted business:

For incepted business: take the future premium relating to incepted business (net of acquisition costs
and reinsurance), and subtract the anticipated net claims and expenses, related to this future premium
only. These anticipated net claims are not the same as the incepted net insurance losses since these net
insurance losses include anticipated losses in respect of premiums already received. Similarly for
expenses.

For un-incepted business: on the assumption that no premiums have been received for un-incepted
business, simply take the un-incepted premium (net of acquisition costs and reinsurance) within the
premium provisions, and subtract the un-incepted net claims and expenses within the premium
provisions.
All the amounts should be determined on a Solvency II basis.
Line 24 – Paid in - Members’ contributions (FIS) – Movement in the period: This is the amount of FIS that
has been paid in and should agree to the amount reported in the QMA202. The balance b/fwd amount should
be the same as the amount reported in the prior year’s QMA 202. The movement during the year as a result
of additional/released capital or valuation differences should be reported under increase or reduction column,
as appropriate.
Line 25 – Called up but not yet paid in - Members’ contributions (FIS) – Movement in the period: This is any
additional FIS that has been requested from members but has not been received by reporting date.
22
Line 27 – Difference in the valuation of assets: Solvency II requires that all assets are valued at fair value
while under GAAP some assets could be valued at cost or amortised cost. For example, under GAAP
receivables are valued at recoverable amount, but Solvency II requires that the expected recoverable amount
should be discounted. Hence this would lead to a difference in valuation. The amount reported within this line
is automatically calculated from the amounts reported in the balance sheet (ASR002).
Line 28 – Difference in the valuation of technical provisions: Valuation of technical provisions is different
under Solvency II compared to GAAP. Solvency II requires that technical provisions should be on a best
estimate. Also under Solvency II, technical provision is based on a legal obligation basis i.e. unincepted
contracts are included in the valuation of the best estimate. These are some of the differences, however for
further details on Solvency II technical provisions, refer to Lloyd’s Solvency II guidance titled “Technical
Provisions under Solvency II Detailed Guidance (March 2011 update)”. These instructions can be accessed
through the following link: Solvency II Technical Provisions Guidance. The amount reported within this line is
automatically calculated from the amounts reported in the balance sheet (ASR002).
Line 29 – Difference in the valuation of other liabilities: Similar to assets, liabilities should be valued at fair
value. Differences between valuation of other liabilities (excluding technical provisions) should be reported
within this line. The amount reported within this line is automatically calculated from the amounts reported in
the balance sheet (ASR002).
Line 30 – Total of reserves and retained earnings from financial statements: This is the members’ balances
as reported in the QMA002, C32 and financial statements. Where the members’ balances is a surplus
(balance due to members), this should be reported as a positive amount but if it is a deficit (balance due from
members), it should be reported as a negative amount. For syndicates with FIS, this amount should exclude
the FIS amount as this is reported within line 33.
Line 31 – Other: This is an analysis cell, hence all material amounts included in this cell must be separately
listed in the analysis table (see section 2.9 ‘analysis cells’ above for details of materiality). The syndicate
should report within this line any amount making up the excess of assets over liabilities that is not reported in
lines 27-30. Lloyd’s does not expect any amount to be reported within this line. Hence where an amount is
reported within this line, details of the amount should be provided on form 990.
Line 33 - Excess of assets over liabilities attributable to basic own fund items (excluding the reconciliation
reserve): This is basic own funds making up the excess of assets of liabilities other than retained earnings
and valuation differences. In the case of syndicates with FIS, this will be the value of FIS, otherwise it will be
nil for those syndicates with no FIS.
Line 34 - Excess of assets: This should agree with the excess of assets over liabilities reported in ASR002
(A89)
3.5
ASR240: Non-life Technical Provisions (By line of business – Part A)
Purposeofform: This form reports an overview of the non-life technical provisions by Solvency II line of
business and split into main components; best estimate (gross and net), reinsurance recoverable,
claims/premiums provisions and risk margin.
This form is required for all reporting years combined and the amounts should be discounted. Calculation of
the best estimate should be in accordance with Solvency II principles and as detailed in the Lloyd’s Solvency
II guidance titled “Technical Provisions under Solvency II Detailed Guidance (March 2011 update)”. These
instructions can be accessed through the following link: Solvency II Technical Provisions Guidance.
Technical provisions calculated as whole: This is the amount of technical provisions in the case of
replicable or hedgeable (re)insurance obligations, as defined in Article 77.4 of the Framework Directive. The
best estimate and risk margin are calculated together where future cash flows associated with the
23
(re)insurance obligations can be replicated reliably using financial instruments for which a reliable market
value is observable. In this case, the value of technical provisions should be determined on the basis of the
market value of those financial instruments. Lloyd’s does not expect syndicates to calculate technical
provisions as a whole, however, where a syndicate has transferred its liabilities to another syndicate through
RITC and the technical provisions transferred cannot be split into best estimate and risk margin, the price
payable can be considered to be the market price of the technical provisions and hence should be reported
within “technical provisions calculated as a whole”.
The valuation of the best estimate should be calculated separately in respect of premium provisions and
claims provisions.
Classification of business as direct business should be based on the insured i.e. insurance contracts issued
to policyholder either directly by the syndicate or through an intermediary should be classified as “direct”
business.
This form requires reporting of technical provisions by Solvency II lines of business. Agents also submit
similar information by risk codes, via the Technical Provisions Data return (TPD). To assist in the completion
of this form, there is already an existing mapping between risk codes and Solvency II lines of business that
was provided as part of the TPD reporting. This may be accessed via the following link:Risk code mapping to
SII class of business
The amounts reported in this form should agree to the amount reported in the balance sheet as follows:
(i)
Total technical provisions calculated as a whole (Q1) should be equal to ASR002 (A53+A57)
(ii)
Total gross best estimate (Q25) should be equal to ASR002 (A54+A58)
(iii)
Total Risk margin (Q27) should be equal to ASR002 (A55+A59)
(iv)
Total recoverable from RI (Q29) should be equal to ASR002, A38
3.6
ASR241: Non-life Technical Provisions (By line of business – Part B)
Purposeofform: This form reports an overview of the premium and claims provisions cash out-flows and inflows and details of the number of homogeneous risk groups, by Solvency II line of business.
Article 80 of the Solvency II Directive requires that, “(re)insurance undertakings shall segment their insurance
and reinsurance obligations into homogeneous risk groups and as a minimum by lines of business, when
calculating their technical provisions”. Hence, where syndicates have segmented their business in
homogeneous risks groups other than Solvency II lines of business, they are required to report on this form,
the number of homogeneous risk groups per Solvency II line of business.
The form also requires a split of cash flows used in the calculation of claims and premium provision. The
cash in-flows should include future premiums (gross of acquisition costs) and receivables for salvage and
subrogation while the cash out-flows should include claims, benefits and expenses.
The net cash flows for each Solvency line of business should agree to the gross best estimate reported in
ASR240 i.e. line 7 and 12 should agree to ASR240, lines 5 and 15 respectively.
24
Line 13 – Percentage of gross technical provisions calculated using simplified methods: The term "simplified
method" refers to a situation where a specific valuation technique has been simplified in line with the
proportionality principle, or where a valuation method is considered to be simpler than a certain reference or
benchmark method. In practice, every method is likely to have some degree of simplification. The percentage
of gross technical provisions calculated using simplified methods should include risk margin since technical
provisions is defined as total of best estimate (including technical provisions calculated as a whole) and risk
margin (as calculated and reported in form 240). The percentage should be reported as absolute positive
amount.
3.7
ASR242: Non-life Technical Provisions (By Country)
Purposeofform: This form reports the split of gross best estimate for direct business (excluding accepted
reinsurance) by material countries.
Gross best estimate for different countries: Only the gross best estimate relating to direct business
should be reported here i.e. excluding reinsurance accepted. Information is required by localisation of risk
(i.e. country where the insured risk is based) for medical expenses, income protection, workers’
compensation, fire and other damage to property and credit suretyship lines of business. For all other lines of
business, information is required by country of underwriting. Information is required on all countries
representing up to 90% of the best estimate (direct business) with the rest reported in “other EEA” or “other
non-EEA”. This materiality applies at Lloyd’s level and hence syndicates should report best estimate by either
localisation of risk or country of underwriting for the following countries: United Kingdom, France, Germany,
Italy, Other EEA, United States of America, Australia, Bermuda, Canada, Japan, New Zealand and Other
non-EEA, irrespective of materiality to the syndicate.
The allocation should be done on a reasonable basis and should be used consistently year on year. The total
per Solvency II line of business for all countries should agree to the sum of the amount (direct business)
reported in ASR240, lines 2, 6 and 16.
3.8
ASR260: Assets and liabilities by currency
Purposeofform: This form analyses assets and liabilities by currency.
The required materiality threshold for reporting this information for the insurer is that all currencies
representing in aggregate up to 90% of both assets and liabilities (in Solvency II value) should be reported
separately.
Materiality has been determined at Lloyd’s level and there are 6+1 currencies that syndicates will be required
to complete. These are: GBP, USD, EUR, CAD, AUD, JPY and OTHER. The syndicate must provide
information for all these currencies, regardless of whether the currency is material for them or not. All these
currencies should be reported unless where a syndicate has been given dispensation in the reporting of the
Technical Provisions Data return (TPD). However, we would expect that syndicates will regularly review the
relevancy of the dispensation, at least on an annual basis.
The data based on the original currency should be converted into reporting currency (GBP) using the rate of
exchange ruling at the end of the year and should be included in the appropriate/correct currency bucket. All
other currencies (outside the 6 currencies listed above) should be converted to GBP and included as
25
“OTHER”.
Please note that these currencies are based on the original currency rather than settlement currencies and
the amounts should be reported in GBP.
Where a syndicate has assets and liabilities in currencies other than the 6 listed currencies and these are
material to them i.e. represent 20% or more of both assets and liabilities, these should be reported
separately. Syndicates should not delete the 6+1 currencies already listed on the form and any additional
currencies required should be selected on ASR026. However, where a syndicate has a currency that is not
material and have been given a dispensation for currency reporting in the TPD, this dispensation may be
applied when completing this form. The currency that is not required to be reported separately due to the
dispensation should be included in the “OTHER” bucket. Lloyd’s expects that syndicates with dispensation
should reassess the appropriateness of the dispensation on a regular basis (at least once a year).
The amounts reported in this form in column H should agree with that reported in the balance sheet
(ASR002) as per the mapping provided below:
Assets
Assets and liability by currency (ASR260)
Balance Sheet (ASR002)
Investments (other than assets held for index-linked and unitlinked funds)
A30
Other assets within scope of AAD230 (other than index-linked
and unit linked funds)
A6+A35+A50
Assets held for index-linked and unit-linked funds
A31
Reinsurance recoverables
A43
Deposits to cedants and insurance and reinsurance
receivables
A44+A45+A46
Any other assets
A1+A2+A3+A4+A5+A47+A48+A49+A51
Total assets
A52
Liabilities
Technical provisions (excluding index-linked and unit-linked
funds)
A56+A60+A64+A68
Technical provisions – index- linked and unit-linked funds
A72
Deposits from reinsurers and insurance and reinsurance
payables
A77+A82+A83
Derivatives
A79
Financial liabilities
A80+A81
Contingent liabilities
A74
Any other liabilities
A73+A75+A76+A78+A84+A85+A86+A87
Total liabilities
A88
26
3.9
ASR280: Life Technical Provisions
Purposeofform: This form reports an overview of life technical provisions (TP) by Solvency II line of
business.
This form is required for all reporting years combined. The form should be completed by life syndicates,
however non-life syndicates with annuities arising from non-life insurance contracts other health insurance
should complete the form. Where applicable, the non-life syndicates should complete column H only,
“annuities stemming from non-life insurance contracts and relating to insurance obligations other than health
insurance obligations” and the life syndicates should complete all other relevant columns/lines of business.
The segmentation required on this form should reflect the nature of the risks underlying the contract
(substance), rather than the legal form of the contract (form).
This form requires reporting of technical provisions by Solvency II lines of business. Syndicate have already
been submitting similar information by risk codes, via the Technical Provisions Data return (TPD). To assist
in the completion of this form, there is already an existing mapping between risk codes and Solvency II lines
of business that was provided as part of the TPD reporting. This may be accessed via the following link:Risk
code mapping to SII class of business
Cash flows (out and in): These are discounted cash flows.
Future expenses and other cash out- flows: As per Article 78(1) of the Directive, these are expenses that
will be incurred in servicing insurance and reinsurance obligations, and other cash-flow items such as
taxation payments which are, or are expected to be, charged to policyholders, or are required to settle the
insurance or reinsurance obligations.
Future premiums: These are cash-flows from future premiums and include premiums from accepted
reinsurance business (gross of acquisition costs).
Other cash in-flows: This does not include investment returns, which are not other cash-in flows for best
estimate calculation purposes.
The net cash flows for each Solvency line of business should agree to the gross best estimate i.e. line 17
should agree to line 2.
The amounts reported in this form should agree to that reported in the balance sheet as follows:
(i)
Total technical provisions calculated as a whole (I1) should be equal to ASR002, A65
(ii)
Total gross best estimate (I2) should be equal to ASR002, A66
(iii)
Total risk margin (I9) should be equal to ASR002, A67
(iv)
Total recoverable from RI (I7) should be equal to ASR002, A40
margin. The percentage should be reported as absolute positive amount.
27
3.10
ASR281: Life Gross Best Estimate by Country
Purposeofform:This form reports an overview of life gross best estimate by country.
however, non-life syndicates with annuities stemming from non-life insurance contracts and relating to
insurance obligation other than health insurance obligations should also complete this form. They should
complete row 3, “annuities stemming from non-life insurance contracts and relating to insurance obligation
other than health insurance obligations”. The life syndicate will be required to complete all other relevant lines
of business. This should be both direct and accepted reinsurance business.
Gross best estimate for different countries: On an annual basis, information is required on all countries
representing up to 90% of the best estimate with the rest reported in “other EEA” or “other non-EEA”. This
should be reported based on the location where the risk was underwritten. Materiality applies at Lloyd’s level
and hence syndicates should report information for the following countries: United Kingdom, Norway, Italy,
Other EEA, United States of America, Japan and Other non-EEA, irrespective of materiality to the syndicate.
per Solvency II line of business for all countries should agree to the sum of the amount reported in ASR280,
lines 1 and 2.
3.11
ASR283: Health SLT Technical Provisions
Purposeofform: This form reports an overview of health SLT technical provisions (TP) by Solvency II line of
business.
however non-life syndicates with annuities arising from non-life insurance contracts relating to health
insurance should also complete this form. Where applicable, the non-life syndicates should complete column
E only, “annuities stemming from non-life insurance contracts and relating to health insurance obligations”
and the life syndicates should complete all other relevant columns/lines of business.
SLT means: Similar to life techniques.
Future expenses and other cash out-flows: As per Article 78(1) of the Directive, these are expenses that
Future premiums: These are cash-flows from future premiums and include reinsurance premiums.
(i)
Total technical provisions calculated as a whole (F1) should be equal to ASR002, A61
(ii)
Total gross best estimate (F2) should be equal to ASR002, A62
28
(iii)
Total Risk margin (F9) should be equal to ASR002, A63
(iv)
Total recoverable from RI (F7) should be equal to ASR002, A39
3.12
ASR284: Health SLT Gross Best Estimate by Country
Purposeofform:This form reports an overview of health SLT gross best estimate by country.
insurance should also complete this form. Where applicable, the non-life syndicates should complete row 3
only, “annuities stemming from non-life insurance contracts and relating to health insurance obligations” and
the life syndicates should complete all other relevant lines of business. This should be both direct and
accepted reinsurance business.
lines 1 and 2.
3.13
ASR510: Minimum Capital Requirement – Non-life
Purposeofform: This form provides details of the input and output of the minimum capital requirement (MCR)
calculation.
The calculation of the MCR combines a linear formula with a floor of 25% and a cap of 45% of the SCR. The
MCR is subject to an absolute floor, expressed in euro, depending on the nature of the undertaking (as
defined in Article 129 (1) (d) of the Solvency II Directive). However, these will not apply at syndicate level and
the reported MCR reported on this form will be the result of applying set factors to the net technical provisions
(excluding risk margin) and net written premiums.
The written premiums should be for the preceding 12 months to the reporting date and should be net of
reinsurance premiums ceded which corresponds to these premiums.
The definition for written premium in the draft delegated acts is as follows:
29
'written premiums' means, in relation to a specified time period, the premiums due to an insurance or
reinsurance undertaking during that time period regardless of the fact that such premiums may relate
in whole or in part to insurance or reinsurance cover provided in a different time period’
The above definition is not GAAP but rather on a cash flow basis. Hence if bound but not incepted contracts
(BBNI) are due during the period under consideration, then these should be considered as written premium,
for example:
Full Premium (£m)
Due by 2014
Year End (£m)
Due after 2014
Year End (£m)
2014 YoA (Incepted by 2014 year end)
25
20
5
2014 YoA (Unincepted by 2014 year end)
75
50
25
15
10
5
Total
115
80
35
The written premium on a UK GAAP basis would be £25m (the top left most cell). The written premium on a
Solvency II basis is only the amounts due to be received (whether received or not) in the 2014 calendar year
and this would be £80m.
The technical provisions should be net of reinsurance recoverables and should be without the risk margin
(i.e. sum of the net best estimate and technical provisions calculated as a whole should be used). The net
technical provisions amount (by Solvency II lines of business) reported in the form should agree to the
amount per corresponding lines of business as reported in ASR240, lines 1 and 26 (where the amounts
reported in ASR240 are positive). Hence the total net technical provisions should agree to sum of ASR240,
Q1 plus ASR240, Q26.
Line 19 – SCR: This should agree to the SCR amount reported in ASR522, D10.
Lines 20 & 21 – MCR cap and floor: MCR should fall between 25% (floor) and 45% (cap) of the syndicate’s
SCR as reported on line 19.
Line 23 – Absolute floor of the MCR: MCR reported shall have an absolute floor of:
(i) EUR 2,500,000 for non-life insurance undertakings, including captive insurance undertakings, save in
the case where all or some of the risks included in one of the classes 10 to 15 listed in Part A of Annex 1
of the Solvency II Directive are covered, in which case it shall be no less than EUR 3,700,000. Refer to
Appendix 1 for the classes of business listed in Annex 1, Part A
(ii) EUR 3,700,000 for life insurance undertakings, including captive insurance undertakings
(iii) EUR 3,600,000 for reinsurance undertakings, except in the case of captive reinsurance undertakings, in
which case the MCR shall be no less than EUR 1,200,000
We would expect that most non-life syndicates will be writing at least one of the classes 10-15 and hence the
expected absolute floor to be reported within line 23 would be EUR 3,700,000. The amount should be
translated to GBP using the closing rate at the end of the period.
30
3.14
ASR511: Minimum Capital Requirement – Life
calculation.
amount per corresponding lines of business as reported in ASR280/ASR283, lines 1 and 8 (where amounts
reported in ASR280 and ASR283 are positive).
The non-life syndicates with annuities arising from non-life insurance contracts should also report in this form
MCR arising from these contracts. Hence, relevant amounts should be reported within lines 4 and 5.
Syndicates are not expected to be writing with profit and unit linked insurance contracts, hence lines 1 to 3
should be zero.
Capital at risk for all life (re)insurance obligations: This is the total capital at risk in relation to all contracts
that give rise to life insurance or reinsurance obligations, equivalent to total sum insured less the value of
technical provisions for such contracts.
(iv) EUR 2,500,000 for non-life insurance undertakings, including captive insurance undertakings, save in
(v) EUR 3,700,000 for life insurance undertakings, including captive insurance undertakings
(vi) EUR 3,600,000 for reinsurance undertakings, except in the case of captive reinsurance undertakings, in
We would expect that life syndicates would report the absolute floor of the MCR (line 12) as EUR 3,700,000
but translated to GBP using the closing rate at the end of the period.
3.15
ASR522: Solvency Capital Requirement – for syndicates on full internal models
Purposeofform: This form reports the calculation of SCR using a full internal model.
This form is required with respect to the prospective reporting year, for example, when reporting for the year
end 2014, the reporting year to be indicated on the form should be 2015 as the SCR being reported would
relate to business due to be written in 2015. The SCR should be the one year amount and also any capital
add-on should be the one year amount.
The risk components listed in the form are similar to those required in the Lloyd’s Capital Return (LCR).
Hence the amount reported in this form, per risk component, should agree to the amount reported in the LCR
submitted in September (including any agreed capital add-on) or a subsequent updated LCR that has been
agreed with Lloyd’s.
31
The difference between gross and net SCR is the impact of loss absorbing capacity of technical provisions
and deferred taxes. According to Article 108 of the Solvency II Directive, the only element to be considered
as a “loss absorbing capacity of technical provisions” is the future discretionary benefits of insurance
contracts. These two would not apply to syndicates, hence the gross and net SCR amounts should be the
same.
Modelling approach to calculation of loss absorbing capacity of technical provisions
To identify modelling approach to a calculation of the loss absorbing capacity of technical provisions, the
following closed list of options should be used:

Modelled and identifiable (MI)

Modelled but not identifiable (MNI)

Not modelled (NM)
Depending on each case, the information reported in cells D1 to D5, G1 to G5 and E9 will vary as follows:

If it is modelled and identifiable, the capital charge reported in D1 to D5 should be including this loss
absorbing capacity (net SCR) while that reported in G1 to G5 should be excluding this loss absorbing
capacity (gross SCR). Also, cell E9 should not be reported and an estimate of an adjustment should be
reported in cell E8 for information only

If it is modelled but not identifiable, the capital charge reported in D1 to D5 and G1 to G5 should be
including this loss absorbing capacity (net SCR). Also, cell E9 should not be reported and an estimate of
an adjustment will be reported in cell E8 for information only

If it is not modelled, D1 to D5 and G1 to G5 will both be reported for the capital charge excluding this loss
absorbing capacity, i.e. gross SCR and cell E9 will be reported.
Modelling approach to calculation of loss absorbing capacity of deferred taxes



Not modelled (NM)
Depending on each case, the information reported in cells D1 to D5, G1 to G5 and F9 will vary as follows:

capacity (gross SCR). Also, cell F9 should not be reported and an estimate of an adjustment should be
reported in cell F8 for information only

including this loss absorbing capacity (net SCR). Also, cell F9 should not be reported and an estimate of
an adjustment will be reported in cell F8 for information only

absorbing capacity, i.e. gross SCR and cell F9 will be reported.
Line 7 – Diversification: This is the total of the diversification within components calculated using the full
internal model.
32
Line 11 – Capital requirement for business operated in accordance with Art. 4 of Directive 2003/41/EC
(transitional): Directive 2003/41/EC (transitional) deals with activities and supervision of institutions for
occupational retirement provision. This does not apply to syndicates hence we would not expect any amount
to be reported within this line.
Line 12 – Solvency capital requirement, excluding capital add-on: This should agree to the net SCR amount
reported in the final LCR agreed with Lloyd’s.
Line 13 – Capital add-ons: This is the amount of capital add-ons that had been agreed with Lloyd’s by the
deadline date of submitting the return to Lloyd’s.
Line 14 – Total amount of Notional Solvency Capital Requirements for ring fenced funds (other than those
related to business operated in accordance with Art. 4 of Directive 2003/41/EC (transitional)): We do not
consider to have any ring fenced funds at Lloyd’s, hence no amount should be reported within this line.
Line 15 – Total amount of Notional Solvency Capital Requirements for remaining part: This is total SCR
reported within line 10, less any amount that relates to ring fenced funds (line 14). Hence considering that no
amount is expected to be reported within line 14, the amount reported within this line should agree to that
reported within line 10.
Line 16 – Diversification between ring fenced funds and between ring fenced funds and remaining part: We
do not consider to have any ring fenced funds at Lloyd’s, hence no amount is expected within this line.
Line 17 – Gross discretionary benefits: These are amounts of technical provisions without risk margin in
relation to future discretionary benefits gross of reinsurance.
Line 18 – Net discretionary benefits: These are amounts of technical provisions without risk margin in
relation to future discretionary benefits net of reinsurance.
Line 19 – Date of formal approval of internal model: This should be the date when the syndicates’ internal
models are approved. This will be communicated once the Lloyd’s internal model process with PRA has been
finalised, hence for interim reporting, please report this as 2014/12/31.
33
Section 4: form instructions for ANNUAL ASSET DATA
4.1
AAD010: Control page
syndicate number and managing agent.
We do recognise, however, that persons signing off the return may not necessarily be those to whom queries
should be sent to. If this is the case, please email Market Finance via [email protected],
with details of an alternative contact who will be included on the queries distribution list relating to the
syndicate.
Due to the volume of data being reported in the Annual Asset Data (AAD), this return is asynchronous.
Hence syndicates will not be able to view the forms as they appear on the specifications, but will get playback
summaries of the information loaded into CMR.
4.2
AAD230: Investment Data – Portfolio List
Purposeofform: This form collects a detailed list of investments and it provides a full vision of the risks in the
investment portfolio.
This form is required for all years combined.
All types of investments (including bank deposits and deposits relating to reinsurance accepted) should be
reported in this form. However, derivatives are not included in this form because they are required to be
completed in specific form i.e. AAD233 for open derivatives. In the case of investment funds, these should be
included in this form at a total level and not on a look-through basis, as the look-through is reported on
AAD236 i.e. only one line per fund should be reported on this form.
All investments, other than the ones listed below, should be reported individually, per ID code. However, in
the case of following assets:

Cash and deposits (CIC XT71, XT72, XT73, XT74 & XT79), only one line per pair (bank and currency)
should be reported

Deposits to cedants (CIC XT75), only one line per counterparty should be reported

Mortgage and loans (CIC XT8#); for mortgages & loans to individuals, including loans on policies, there
should be only two lines, one line regarding loans to senior management and another regarding loans to
other individuals without distinction between individuals
This form will be used for collecting information required for the Lloyd’s Internal Model (LIM) as well as for
reporting to the PRA. To ensure that adequate information for LIM is available, the original EIOPA template
has been tailored to include fields to collect information on funds in syndicate (FIS). The two fields that have
been added are market value (Non-FIS) and market value (FIS).
34
Lloyd’s managed and cash sweep investment funds
Lloyd’s are proposing (subject to agreement with the PRA) that funds managed by Lloyd’s Treasury &
Investment Management (LTIM) (ASL, Overseas Trust Funds and PTF Commingled Funds) and the primary
sweep accounts will be reported as investment funds in AAD 230 with full look-through information provided
by Lloyd’s in AAD236.
When reporting these investments please include as a single line entry on both the AAD 230 and 236;
classifying the “Level of look-through” as “O” and the “CIC” as “XL39” on the 236. Refer to the AAD 230 and
236 Lloyd’s managed investment fund (LMIF) templates on the AAD/QAD FAQ document for detailed
information on how to report these investments. The templates provide the correct data for all the AAD fields;
syndicates will only need to add their total valuation for each fund (please remember that all the valuations
must be reported in GBP). The complete list of underlying assets will then be applied by Lloyd’s upon
submission.
Please use the LMIF ID Codes as per the below tables and note that these fund codes should only be
used for trust fund assets managed by Lloyd’s Treasury & Investment Management (LTIM) (ASL,
Overseas Trust Funds and PTF Commingled Funds). All other syndicate assets within your trust
funds should be reported as directly held investments i.e. individual securities should be reported
only in AAD230 and investment funds should be reported as a single line in AAD230 and lookthrough in AAD236.
Additional Securities Limited (ASL)
LMIF
Investment Fund Name
ASLAU0001
ASL – Australia
ASLBS0001
ASL – Bahamas
ASLBR0001
ASL – Brazil
ASLKY0001
ASL - Cayman Islands
ASLGD0001
ASL – Grenada
ASLHK0001
ASL - Hong Kong
ASLNA0001
ASL – Namibia
ASLSG0001
ASL – Singapore
ASLVC0001
ASL - St Vincent & Grenadines
ASLCH0001
ASL – Switzerland
ASLTT0001
ASL – Trinidad
The ASL Lloyd’s Asia and ASL Singapore assets are managed together and should therefore be
combined in your submission under ASL Singapore (ASLSG0001)
35
Overseas Securities Trust Funds (OSTF)
LMIF
AJATF2001
Australian JATF(2)
ATF000001
Australian Trust Fund
CMF000001
Canadian Margin Fund
ITF000001
Illinois Trust Fund
JATFRE001
JATF Reinsurance
JATFSL001
JATF Surplus Lines
KJATF0001
Kentucky JATF
KTF000001
Kentucky Trust Funds
SATTF0001
South Africa Transitional Fund
SATF00001
South Africa Trust Fund
PTF Commingled Funds
LMIF
PTFCA0001
Canadian PTF Commingled Account
LCBACA001
LCBA CAD Commingled Account
LCBAUS001
LCBA USD Commingled Account
LDTF00001
LDTF Commingled Account
PTFEU0001
PTF EURO Commingled Account
PTFGBP001
PTF Sterling Commingled Account
Cash Sweep Investment Funds
LMIF
FIERACAD1
FIERA Canadian Dollar Short Term Blended Investment Account (RBC Sweep)
FIERAUSD1
FIERA US Dollar Short Term Blended Investment Account (RBC Sweep)
WALF00001
Western Asset (US Dollar) Liquidity Fund (WALF) previously Citi Institutional
Liquidity Fund (CILF)
WAICR0001
Western Asset Institutional Cash Reserves (WAICR) previously Citi Institutional
Cash Reserve (CICR)
36
Investments issued by government agencies or issued with a government guarantee and private
equity investments
The definition provided by EIOPA on government bonds includes “bonds issued by public authorities, whether
by central governments, supra-national government institutions, regional governments or municipal
governments”. This definition does not include agency and government guaranteed bonds, therefore Lloyd’s
expects these assets to be classified as corporate bonds (CIC ##2#) and reported as such until further
clarification is received from EIOPA/PRA. In addition, EIOPA does not provide specific CIC sub-categories
for investments issued by government agencies, investments issued with a government guarantee, reverse
repurchase agreements or private equity investments, but Lloyd’s requires these assets to be identified for
modelling purposes. Therefore, please complete the Issue type field for agency, government guaranteed
instruments, reverse repurchase agreements and private equity investments as per the below table.
Asset Type
Issue Type
Agency
AGENCY
Government Guaranteed
GOVTGTD
Private Equity
PRIVEQ
Reverse Repurchase Agreements
REVREPO
Other
NA
For reverse repurchase agreements, Lloyd’s also requires syndicates to identify the asset type of the
collateral; when reporting a reverse repurchase agreement in AAD230, the CIC field should be completed
using the asset class of the collateral. When reporting a reverse repurchase agreement in AAD 236 the CIC
and the Underlying asset category fields should also be completed using the asset class of the collateral.
Supra-national bonds
These are bonds issued by public institutions established by a commitment between national states, e.g.
issued by a multilateral development bank as listed in Annex VI, Part 1, Number 4 of the Capital
Requirements Directive (2006/48/EC) or issued by an international organisation listed in Annex VI, Part 1,
Number 5 of the Capital Requirements Directive (2006/48/EC). These are:
Multilateral banks

International Bank for Reconstruction and Development

International Finance Corporation

Inter-American Development Bank

Asian Development Bank

African Development Bank

Council of Europe Development Bank

Nordic Investment Bank

Caribbean Development Bank

European Bank for Reconstruction and Development

European Investment Bank

European Investment Fund
37

Multilateral Investment Guarantee Agency.
International organisations

European Community

International Monetary Fund

Bank for International Settlements.
Portfolio: This should be reported as either Life (L) or Non-life (NL) depending on the type of syndicate.
Fund number: This is applicable to assets held in ring-fenced or other internal funds (defined according to
national markets). This number should be consistent over time and with the fund number in ASR288, column
F. Lloyd’s does not consider there to be any ring-fenced or internal funds, hence this field should be left
blank.
Asset held in unit linked and index linked funds (Y/N): There are two options for reporting i.e. “Y” or “N”
and since syndicates do not write unit linked and index linked contracts, the option to be reported should be
“N”.
ID code: All assets reported in AAD230 should be allocated a unique ID code and where there are multiple
holdings of the same asset these should be aggregated and reported as one line. The ID code should be
ISIN if available, other recognised code (CUSIP, CINS, Sedol, Bloomberg ticker etc.) or the syndicate’s
specific code if nothing else is available. In the case of cash at bank, the bank account number may be used
as ID code. Where this is not possible, a unique ID should be allocated and this should be used in all future
submissions. In the case of investment funds, the ID code reported in this form should be the investment
fund code (LMIF code if the fund is a Lloyd’s Treasury & Investment Management (LTIM) fund or a cash
sweep investment fund) and, for the same investment fund, this code should be the same as the investment
fund code reported in AAD236.
ID code type: Type of ID Code used for the “ID Code” item and should be one of the following: ISIN, CUSIP,
CINS, Bloomberg, LMIF, undertaking specific and other. This is presented in the CMR as a closed list and it
is included in the reference data. For each investment fund, the ID code type reported on this form should be
the same as the Investment fund code type reported in AAD236.
Assets pledged as collateral: This identifies assets in the balance sheet that have been pledged as
collateral, i.e. collateral pledged (CP), collateral for reinsurance accepted (CR), collateral for securities
borrowed (CB), repos (R) and not applicable (NA). For partially pledge assets two lines for each asset should
be reported, one for the pledged amount and other for the remaining part.
Security title: This is the name of the security and it is not applicable for mortgages and loans on individuals
within CIC category 8 (Mortgages and Loans) as these are not required to be reported individually, and for
Plant and Equipment (CIC XT95). For cash in hand and cash at bank, the security title may be referred to as
“cash in hand” and “cash at bank” respectively.
Issuer name: An issuer is defined as the entity that offers securities representing parts of its capital, debt,
derivatives etc., for sale to investors. For investment funds, the issuer name is the name of the funds
manager. This is not applicable for mortgages and loans on individuals within CIC category XT8# (Mortgages
and Loans), as these are not required to be reported individually, and for Property (CIC category XT9#).
Issuer code: This should be completed with legal entity identifier (LEI) or interim entity identifier (PRE-LEI).
LEI is a unique identifier (20-digit, alpha-numeric code) associated with a legal person or structure that is
organised under the laws of any jurisdiction (excluding natural persons) and created in accordance with the
38
international standard ISO 17442. LEIs will enable consistent and unambiguous identification of parties to
financial transactions, including non-financial institutions.
The Legal Entity Identifier (LEI) initiative is designed to create a global reference data system that uniquely
identifies every legal entity or structure, in any jurisdiction, that is party to a financial transaction. Endorsed by
the G20, the establishment of a Global LEI System (GLEIS) is critical to improving measurement and
monitoring of systemic risk. Global, standardised LEIs will enable regulators and organisations to more
effectively measure and manage counterparty exposure while also resolving long standing issues on entity
identification across the globe. To aid global allocation of LEIs, Local Operating Units (LOUs) have been
formed and must be sponsored by local regulators to assign and maintain LEIs to firms on a cost recovery
basis.
While the GLEIS is being developed official Pre-LOUs have been introduced to provide an interim solution.
As with the proposed official GLEIS model, Pre-LEIs are allocated by Pre-LOUs according to the agreed
international standard which outlines the structure and minimum data record requirements. In the UK, the
London Stock Exchange has been endorsed by the Regulatory Oversight Committee (ROC) as an authorised
Pre-LOU for the global allocation of LEIs.
Where a code does not exist, syndicates should leave this field blank.
Issuer code type: This is the type of issuer code i.e. LEI or PRE-LEI. Where the issuer code field was left
blank because the code does not exist, “NA” should be reported in this field.
Issuer sector: This is the economic sector of the issuer of the security and should be based on the latest
version of the NACE code. The letter reference of the NACE code identifying the section should be used as a
minimum for identifying sectors, for example, “A” or “A.01.11” would be acceptable except for NACE relating
to financial and insurance activities for which the letter identifying the section followed by the 4 digits code for
the class should be used (for example, “K.66.30” to denote “fund management activities”).
This item is not applicable for CIC category 8, mortgages and loans (for mortgages and loans on individuals,
as those assets are not required to be individualised), and CIC XT95, plant and equipment (for own use).
Issuer group: This is the name of the ultimate parent undertaking of the issuer. For investment funds, the
group relation is in relation to the fund manager.
Issuer group code: This is legal entity identifier (LEI) or interim entity identifier (PRE-LEI). Where a code
does not exist, syndicates should leave this field blank.
Issuer group code type: This is the type of the issuer group code i.e. LEI or PRE-LEI. Where the issuer
group code field was left blank because the code does not exist, “NA” should be reported in this field.
Issuer country: This is the country where the legal seat of issuer is located. For investment funds, the
country is relative to the funds manager. The legal seat, for this purpose, should be understood as the place
where the issuer head office is officially registered, at a specific address, according to the commercial
register (or equivalent). The International Organisation for Standardisation (ISO) alpha 2 codes should be
used, i.e. two letter country codes. For example, “US” to denote United States, except for supranational
issuers and European Union institutions where “XA” and “EU” should be used respectively.
Country of custody: This is the ISO code of the country where undertaking assets are held in custody. For
identifying international custodians (e.g. Euroclear), the country of custody will be the one corresponding to
the legal establishment where the custody service was contractually defined. Where there are multiple
custodians, the country of the biggest custodian should be reported i.e. one that holds securities with the
highest value.
39
Currency (ISO code): This is the currency of the issue and the code should be the ISO code as defined in
ISO 4217 alphabetic code, for example, USD for US dollars.
CIC: This refers to Complementary Identification Code (CIC) and it is the EIOPA Code used to classify
securities. See Appendix 1 for the CIC table. When classifying an asset using the CIC table, syndicates
should take into consideration the most representative risk to which the asset is exposed. The code should
comprise of four characters, for example, ES15 denoting, treasury bonds listed in Spain. When identifying the
location of the asset, the country ISO code where the asset is traded should be used. When determining CIC
for supranational issuers and European Union institutions “XA” and “EU” should not be used, but instead the
country ISO code where the security is traded/listed should be used. If this is traded in more than one
country, then the country used for valuation reference should be used.
Participation: This is defined in article 13(20) of the Solvency II Directive as “ownership, direct or by way of
control, of 20% or more of the voting rights or capital of an undertaking”. These are the five different criteria
for classifying participation:

the asset is not a participation (N)

it is a participation but not consolidated at group level and not strategic (YNGNS)

it is a participation not consolidated at group level but strategic (YNGS)

it is a participation, consolidated at group level and not strategic (YGNS)

it is a participation, it is consolidated at group level and is strategic (YGS)
Lloyd’s would not be expecting any syndicate to have participations hence the expected selection is “N”
External rating: This is the rating given by an external rating agency and is only applicable to CIC categories
##1#, ##2#, ##5# and ##6#. The syndicate must report the external rating (only the rating symbol, without
any outlook) that in their perspective is best representative and used internally for SCR calculations. This field
must always be populated, therefore where a security is not rated, “NR” should be reported. The rating
reported should be as per the closed list provided in the CMR as part of the reference data.
Rating agency: This is the rating agency giving the external rating and should be selected from a closed list
provided in the CMR as part of the reference data. Similar to the external rating, where a security is not rated,
“NR” should be reported.
Duration: This is the ‘residual modified duration’ in years. For assets without fixed maturity the first call date
should be used. It only applies to CIC categories ##1#, ##2#, ##42 (when applicable, e.g. for investment
funds mainly invested in bonds), ##5# and ##6#.
Quantity: This depends on the type of assets (e.g. number of shares for equity and investment funds). This
is not applicable for CIC categories ##1#, ##2#, ##5#, ##6#, XT7#, XT8# and XT9#.
Total par amount: This is a new field introduced in the template so as to separate quantity (for shares and
investment funds) and par amount invested (for debt securities). This is the par value of debt securities i.e.
CIC categories ##1#, ##2#, ##5# and ##6# and will be the same as the amount previously reported in the
quantity field.
Unit Solvency II price: This depends on the type of assets (amount in GBP for shares or units held in
investment funds). This is not applicable for CIC categories ##1#, ##2#, ##5#, ##6#, XT7#, XT8# and XT9#.
Percentage of par Solvency II value: This is a new field introduced in the template in line with the
introduction of the total par amount field. This is the percentage of market value/par value (only for CIC 1,2,5
and 6) and is similar to the unit Solvency II price previously reported for debt securities (note that this field
40
should be completed as a percentage and not a ratio as previously reported in the unit Solvency II value).
The market value should be the clean price (i.e. should not include accrued interest). For example,
percentage of par Solvency II value for a corporate bond with a clean market price of £ 900 and a par value
of £ 1,000 should be reported as 90. This is not applicable for CIC categories ##3#, ##4#, XT7#, XT8# and
XT9#.
Solvency II valuation method: Identify the valuation method used when valuing assets. This should either
be one of the three options below:

Quoted market price in active markets for the same assets (QMP)

Quoted market price in active markets for similar assets (QMPS)

Alternative valuation methods (AVM)
Acquisition price: This is the acquisition price of each asset i.e. unit price per share/unit held in the
investment fund. Where there are different acquisition prices due to acquisitions made at different dates, an
average acquisition price must be used and consequently only one line is completed for one single asset,
independently of having more than one acquisition. This is not applicable to CIC categories XT7# and XT8#.
Total Solvency II amount: This is the Solvency II value of the investments and it corresponds to:

Multiplication of “Quantity” by “Unit Solvency II price” plus “Accrued interest” (Quantity x Unit Solvency II
price + Accrued interest) for the following CIC categories; ##3# and ##4#. It must also equal to the sum
of Market value (Non-FIS), Market value (FIS) and Accrued interest; or

Multiplication of “Total par amount” by “Percentage of par Solvency II value” plus “Accrued interest” (Total
par amount x Percentage of par Solvency II value + Accrued interest) for the following CIC categories;
##1#, ##2#, ##5# and ##6#. It must also equal to the sum of Market value (Non-FIS), Market value (FIS)
and Accrued interest.
Maturity date: This is only applicable for CIC categories ##1#, ##2#, ##5#, ##6# and ##8# and corresponds
always to the maturity date, even for callable securities. The date should be reported in ISO date format i.e.
YYYY/MM/DD and for perpetual securities, the date should be reported as 9999/12/31. This date should be
greater than the reporting end date.
Accrued interest: This is the amount of interest that is to be received in future from each asset and it forms
part of Total Solvency II amount.
Market value (Non-FIS): This is the market value (clean value) of the securities held in the premium trust
funds (PTFs) in respect of open and run-off reporting years of account. Where the valuation basis adopted in
the QMA is the same as that required for Solvency II, the total market value (Non-FIS) should tie back to the
amounts reported in the QMA201.
Market value (FIS): This is the market value (clean value) of the securities held as, either separately or
commingled within the syndicates PTFs, in respect of funds in syndicates (FIS). Where the valuation basis
adopted in the QMA is the same as that required for Solvency II, the total market value (FIS) should tie back
to the amounts reported in the QMA202.
Where securities are commingled, that is, investments in respect of FIS and open/run-off years of account
(Non-FIS) are not managed separately, only one entry per security should be reported with the amounts
presented in the appropriate columns.
Issue type: This is the means of identifying investments issued by a government agency, government
guaranteed bonds and reverse repurchase agreements for capital modelling purposes. Please use the
appropriate code as listed on page 37. If none of the specific options is applicable please report “NA”.
41
4.3
AAD233: Derivatives Data – Open Positions
Purposeofform: This form reports information on all derivatives held by the syndicate. It provides information
on risks and risk mitigating strategies followed through the use of derivatives.
This includes all derivatives contracts that existed during the reporting period and were not closed prior to the
end of the reporting period. Derivatives to be reported in this form are the ones directly held so please don’t
include the ones held indirectly through investment funds or structured products. The value of the open
contracts at the end of the reporting year should agree to ASR002, lines A27 and A79.
Lloyd’s expect syndicates to report one line for each derivative, except for derivatives which have more than
one currency as these derivatives should be split into the components and reported in different lines. Foreign
exchange contracts, for example, should be populated as two entries (one for each currency); a long (buy)
leg and a short (sell) leg. Worked examples of derivatives data reported on AAD233 are available in the
AAD/QAD FAQ document (Valuation and Balance Sheet section of Lloyds.com).
blank.
Derivatives held in unit linked and index linked funds (Y/N): There are two options for reporting i.e. “Y” or
“N” and since syndicates do not write unit linked and index linked contracts, the option to be reported should
be “N”.
ID code: This should be ISIN if available, other recognised code (CUSIP, Sedol, Bloomberg ticker etc.) or
syndicate’s specific if nothing else is available.
When a derivative is reported in multiple lines (e.g. a foreign exchange contracts reported in two lines, one
for each leg) the same ID code should be used for all the related entries.
Bloomberg, undertaking specific and other. This is presented in the CMR as a closed list and it is included in
the reference data.
Counterparty name: This is the identification of the counterparty of the derivative contract (derivative
exchange or the counterparty for OTC derivatives).
Counterparty code: This is legal entity identifier (LEI) or interim entity identifier (PRE-LEI) i.e. an ISO code
that identifies the counterparty. Where a code does not exist, syndicates should leave this field blank.
Counterparty code type: This is the type of counterparty code i.e. LEI or PRE-LEI. Where the counterparty
code field was left blank because the code does not exist, “NA” should be reported in this field.
External rating: This is the rating of the counterparty given by an external rating agency and is only
applicable to OTC or bespoken derivatives. The syndicate must report the external rating (only the rating
symbol, without any outlook) that in their perspective is best representative and used internally for SCR
calculations. This field must always be filled in, hence where a security is not rated, “NR” should be reported.
Rating agency: This is the rating agency giving the external rating and should be selected from a closed list.
Similar to the external rating, where a security is not rated, “NR” should be reported.
Counterparty group: This is the name of the ultimate parent undertaking of the counterparty.
42
Counterparty group code: This is legal entity identifier (LEI) or interim entity identifier (PRE-LEI) i.e. an ISO
code that identifies the ultimate parent undertaking of the counterparty. Where a code does not exist,
syndicates should leave this field blank.
Counterparty group code type: This is the type of counterparty group code i.e. LEI or PRE-LEI. Where the
counterparty group code field was left blank because the code does not exist, “NA” should be reported in this
field.
Contract name: This is the name of the derivative contract.
Asset or liability underlying the derivative: This is the asset or liability underlying the derivative contract.
This should be reported in the form of the ID code and it should be provided for derivatives that have a single
underlying instrument in the syndicate’s portfolio.
Currency (ISO code): This is the currency of the derivative and should be presented as the ISO currency
code, for example, CAD for Canadian Dollar. For derivatives that have more than one currency, it should be
split into the components and reported in different lines.
Foreign exchange contracts should be populated as two entries (one for each currency); a long (buy) leg and
a short (sell) leg.
securities. Please see Appendix 1 for the CIC table. When classifying an asset using the CIC table,
syndicates should take into consideration the most representative risk to which the asset is exposed to. The
code should comprise of four characters, for example, FIC3 denoting, put option on currency listed in
Finland.
Use of derivatives: This describes the use of derivative i.e. micro / macro hedge (MI/MA), efficient portfolio
management (EPM). Micro hedge refers to derivatives covering a single financial instrument, forecasted
transaction or liability. Macro hedge refers to derivatives covering a set of financial instruments, forecasted
transactions or liabilities.
Delta: This measures the rate of change of option value with respect to changes in the underlying asset's
price. This is only applicable to CIC categories ##B# and ##C# (Call and put options).
Notional amount: This is the amount covered or exposed to the derivative. For futures and options, this
corresponds to the contract size multiplied by the number of contracts; and for swaps and forwards, this
corresponds to the contract amount. The notional amount refers to the amount that is being hedged /
invested (when not covering risks). If several trades occur, this should be the net amount at the reporting
date.
Lloyd’s expect the notional amount to be reported always in GBP and as a positive value. When a derivative
is reported in two or more lines (e.g. a foreign exchange contracts reported in two lines, one for each leg), the
same GBP equivalent notional amount should be reported in both lines.
Long or short position: A holder of a long position owns the security or notional amount at the contract
inception, while a holder of a short position will own the security or the nominal amount at the end of the
derivative contract. For derivatives that have more than one currency, the syndicates should report both the
long (or buy) side of the derivative contract and the short (or sell) side in different lines.
The long and short position for swaps is defined relatively to the notional amount. For interest rate swaps
(CIC categories ##D1 and ##D3) the syndicate has to report one of the following: "FX-FL (fixed-for-floating)",
"FX-FX (fixed-for-fixed)", “FL-FX (floating-for-fixed)” or "FL-FL (floating-for-floating)".
43
Premium paid/received to date: This is the amount received (if sold) or paid (if bought), for options and
also up-front and periodical amounts paid / received for swaps, since inception. If the cost is zero, report “0”.
Number of contracts: These are the number of derivative contracts in the portfolio and it should be the
number of contracts entered into. The number of contracts should be the ones outstanding at the end of the
period.
Contract dimension: These are the number of underlying assets in the contract (e.g. for equity futures, it is
the number of equities to be delivered per derivative contract at maturity, for bond futures it is the reference
amount underlying each contract). This only applies to futures (CIC category ##A#) and options (CIC
categories ##B# and ##C#).
Trigger value: This is the reference price for futures, strike price for options, currency exchange rate or
interest rate for forwards, etc. This is not applicable to interest rate and currency swaps.
In the case of more than one trigger over time, report the trigger value during the reporting period.
Unwind trigger of contract: This is to identify the event that causes the unwinding of the contract. Possible
options are:

B - bankruptcy of the underlying or reference entity

F - adverse fall in value of the underlying reference asset

R - adverse change in credit rating of the underlying assets or entity

N - novation i.e. the act of replacing an obligation under the derivative with a new obligation or replacing a
party of the derivative with a new party

M - multiple events or a combination of events

O - other events.
Maximum loss under unwinding event: This is the maximum amount of loss if an unwinding event occurs
and it should be reported as negative value. It is only applicable to CIC category ##F#.
Swap outflow amount: This is the amount delivered under the swap contract, during the reporting period. It
corresponds to the interest paid for interest rate swap (IRS) and amounts delivered for currency swaps, credit
swaps, total return swaps and other swaps. It is only applicable to CIC category ##D#.
Swap inflow amount: This is the amount received under the swap contract, during the reporting period. It
corresponds to interest received for IRS and amounts received for currency swaps, credit swaps, total return
swaps and other swaps. It is only applicable to CIC category ##D#.
Swap delivered currency: This is the currency of the swap price and it should be in form of ISO currency
code. This is only applicable for currency swaps (CIC ##D2) and interest rate and currency swaps (CIC
##D3).
Swap received currency: This is the currency of the swap notional amount and it should be in form of ISO
currency code. This is only applicable for currency swaps (CIC ##D2) and interest rate and currency swaps
(CIC ##D3).
Trade date: This is the date of the trade of the derivative contract. When various trades occur for the same
derivative, only the first trade date of the derivative and only one line for each derivative (no different lines for
each trade) should be reported. The date should be reported in ISO date format (YYYY/MM/DD).
44
Maturity date: This is the contractually defined date of close of the derivative contract, whether at maturity
date, expiring date for options (European or American), etc. The date should be reported in ISO date format
(YYYY/MM/DD). The maturity date is expected to be greater than the reporting end date.
Duration: This is the residual modified duration of the underlying asset, in years, for derivatives for which a
duration measure is applicable.
Solvency II valuation method: This is the valuation method used when valuing assets. This should be one
of the three options below:



Total Solvency II amount (Non-FIS): This is the market value of the derivatives (i.e. the value of the
derivative contract and not of the underlying asset) held in the premium trust funds and can be positive,
negative or zero. Derivative assets (profits) should be reported as positive while liabilities (losses) as negative
values.
When a derivative is reported in two or more lines (e.g. a foreign exchange contracts reported in two lines,
one for each leg), the syndicate should report the total Solvency II amount (Non-FIS) on only one line i.e.
either on the buy (L) side or on the sell (S) side.
Total Solvency II amount (FIS): This is the market value of the derivatives (i.e. the value of the derivative
contract and not of the underlying asset) held as funds in syndicates (FIS) and can be positive, negative or
zero. Derivative assets (profits) should be reported as positive while liabilities (losses) as negative values.
one for each leg), the syndicate should report the total Solvency II amount (FIS) on only one line i.e. either on
the buy (L) side or on the sell (S) side.
Total Solvency II amount: This is the market value of the derivative (i.e. the value of the derivative contract
and not of the underlying asset) as of the reporting date and and it should be equal to the sum of Total
Solvency II amount (Non-FIS) and Total Solvency II amount (FIS). It can be positive, negative or zero.
Derivative assets (profits) should be reported as positive values while derivative liabilities (losses) as negative
values.
For every derivative Lloyd’s expect the total Solvency II amount (in absolute terms) to be lower than the
notional amount.
4.4
AAD236: Investment Funds (look-through approach)
Purposeofform: This form reports information for each investment fund at a security by security level.
All the investment funds reported in the balance sheet (ASR002) and AAD230 should be reported in this
form. The syndicate should ensure that reconciliation between this form, AAD230 and the balance sheet is
carried out at a fund level as well as in aggregate. The level of look-through on investment funds should
ensure that all material risks are captured. Solvency II requires this form to be reported at asset category
level. However since this form is required for LIM purposes, additional fields (similar to those required in
AAD230) have been added and the form will be required to be completed at security level. Look-through
should be performed based on the following three options:
45

Standard (S): This is the security level look-through. Where there are a number of iterations of the lookthrough approach (for example, where an investment fund is invested in other investment funds), the
number of iterations should be sufficient to ensure that all material market risks are captured. When
performing a standard look-through, syndicates should report only one line for each underlying security,
even if the underlying security is a derivative with more than one currency (e.g. a forward exchange rate
agreement). In the case of derivatives that are part of an investment fund, these should not be reported
in AAD233.

Mandate (M): This option is acceptable where a full security level look-through is not possible. For
collective investment schemes that are not sufficiently transparent, the investment mandate/fund’s
prospectus guidelines should be used as a reference. It should be assumed that the scheme invests in
accordance with its mandate in such a manner as to produce the maximum overall capital requirement

Other (O): Where security level and mandate look-through options are not possible, funds should be
treated as equity and classified as “Other”. This assumes a high level of investment risk and will always
have a CIC of XL39. We also request that the option of “Other” is used when reporting those investments
in Lloyd’s Treasury & Investment Management (LTIM) Funds (ASL, Overseas Trust Funds and PTF
Commingled Funds) and the primary sweep accounts (as listed above previously). Lloyd’s will then apply
the full “Standard” look-through on behalf of the syndicate. This means that for all investment funds
reported with a level of look-through of “O”, only one line per fund should be reported on this form.
Considering that this information is also being collected for LIM purposes, where possible, syndicates are
required to use a security level look-through for investment funds and to refer to the investment
mandate/prospectus if this is not possible. Please note that only one level of look-through per investment
fund should be reported. Where there is a combination of standard and mandate look-through approaches
within a single investment fund, please report the level of look-through as “M” mandate for the whole fund.
Investment fund code: This should be ISIN if available, other recognised code (CUSIP, Sedol, Bloomberg
ticker etc.) or syndicate’s specific if nothing else is available. LMIF code should be used if the fund is a
Lloyd’s Treasury & Investment Management (LTIM) fund or a cash sweep investment fund. For each
investment fund, the investment fund code reported on this form should be the same as the respective ID
code reported in AAD230.
Investment fund code type: Type of ID Code used for the “Investment fund Code” item and this should be
one of the following: ISIN, CUSIP, Bloomberg, LMIF, undertaking specific and other. This is presented in the
CMR as a closed list and it is included in the reference data. For each investment fund, the Investment fund
code type reported on this form should be the same as the ID code type reported in AAD230.
ID code: This is the ID code of the securities in which a fund is invested. This should be ISIN if available,
other recognised code (CUSIP, CINS, Sedol, Bloomberg ticker etc.) or undertaking specific if nothing else is
available.
Where the level of look-through of a fund is “S” or “M”, Lloyd’s expect the ID codes to be the ID codes of the
underlying securities and to be different from the investment fund code. There should be no duplicate ID
codes reported within the same investment fund. Indicative ID codes can be used for “M” (e.g.
FUNDXYEQTY, FUNDXYGOVT, etc…).
Where the level of look-through is “O”, Lloyd’s expect the ID code to be the same as the investment fund
code.
ID code type: Type of ID Code used for the “ID Code” item and this should one of the following: ISIN,
CUSIP, CINS, Bloomberg, LMIF, undertaking specific and other. This is presented in the CMR as a closed
list and it is included in the reference data.
46
Security title: This is the name of the securities in which a fund is invested. For cash in hand and cash at
bank, the security title may be referred to as “cash in hand” and “cash at bank” respectively.
Where the level of look-through of a fund is “S” or “M”, security title should refer to the securities in which the
fund is invested.
Where the level of look-through is “O”, Lloyd’s expects the security title to be the name of the investment
fund.
Issuer group: This is the name of the ultimate parent undertaking of the issuer.Where the level of lookthrough of a fund is “S”, the issuer group should be the ultimate parent undertaking of the issuer of the
securities in which a fund is invested.
Where the level of look-through is “O” or “M”, the issuer group should be the ultimate parent undertaking of
the fund manager.
should be used. It only applies to CIC categories ##1#, ##2#, ##5# and ##6#. Duration is expected to be zero
when the level of look-through is “O”.
CIC: This is the Complementary Identification Code (CIC) of the securities in which a fund is invested. Please
see Appendix 1 for the CIC table. When classifying an asset using the CIC table, syndicates should take into
consideration the most representative risk to which the asset is exposed. The requirement to provide “lookthrough” data to underlying exposures of mutual funds and investment funds means that the “investment
funds” (CIC category ##4#) should not be used. In the case where no look-through is performed, i.e. level of
look-through is reported as “O”, this is treated as equity other, and the reported CIC should be XL39. CIC for
investment fund liabilities, where applicable, should be reported as “NA”.
Underlying asset category: This identifies the securities categories present in the investment fund and
these categories should be as defined in the CIC table. This should be the third character of the CIC. For
example, government bonds should be reported as “1” and Structured notes as “5”. However, for equity, CIC
category must be split between listed (3L) and non-listed (3NL). The investment fund’s liabilities should also
be identified with (L).
Where the Level of look-through is “O”, the underlying asset category should be “3NL”.
Geographical zone of issue: This should show a breakdown of asset category by issuer geographical zone
i.e. where the legal seat/head office of the issuer is located. This is to identify the geographical zone of the
security category, using the following closed list of geographical zones:
47

EEA

OECD (non-EEA)

RoW (rest of the world)
Total Solvency II amount (Non-FIS): This is the Solvency II value (including accrued interest) of the
securities held in the premium trust funds (PTFs), in respect of open and run-off reporting years of account.
Where the valuation basis adopted in the QMA is the same as that required for Solvency II, the total Solvency
II amount (Non-FIS) should tie back to the amounts reported in the QMA201 (plus respective accrued interest
reported as receivable in the QMA).
Total Solvency II amount (FIS): This is the Solvency II value (including accrued interest) of the securities
held as, either separately or commingled within syndicates PTFs, in respect of funds in syndicates (FIS).
II amount (FIS) should tie back to the amounts reported in the QMA202 (plus respective accrued interest
Total Solvency II amount: This is the total Solvency II value (including accrued interest) of the securities
and it should be equal to the sum of Total Solvency II amount (Non-FIS) and Total Solvency II amount (FIS).
The “Total Solvency II amount” for each investment fund code reported on AAD236 should agree to the
“Total Solvency II amount” for the corresponding ID code reported on AAD230. Hence the sum of “Total
Solvency II amount” for all entries on AAD236 should equal the sum of “Total Solvency II amount” for all
investment fund entries on AAD230 (i.e. where the third character of the CIC on AAD230 is “4”).
appropriate code as listed on page 37. If none of the specific options is applicable please use “NA”.
Level of look-through: This indicates the level of look-through performed and selection should be as
follows:

Standard (S) – look-through is performed at security by security level

Mandate (M) – where investment funds are not sufficiently transparent, investment mandates should be
used

Other (O) – If the above is not achievable, the funds should be reported as “equity other”.
Depending on the level of look-through, some of the fields will not be required to be reported. Below is a table
showing what fields are required to be completed under each level of look-through:
All the fields (apart from “duration” that is not required when the level of look-through is “O”) are required to
be completed.
48
Section 5: QUALITATIVE REPORTING
5.1
Introduction
5.1.1
This section covers qualitative reporting as at 31 December 2014. This is required to ensure Lloyd’s
compliance with the EIOPA Guidelines on Pillar 3 reporting, as enacted for within the United
Kingdom by the Prudential Regulation Authority (PRA) Supervisory Statement SS4/13.
5.1.2
EIOPA Guidelines on provision of information to national supervisory authorities introduce qualitative
reporting – specifically on systems of governance, capital management and valuation of assets and
liabilities – as part of the interim reporting.
5.2
Detailed application of the Guidelines on qualitative reporting to syndicates
5.2.1
Each syndicate shall be required to make a qualitative submission as at 31 December 2014 as part
of its Pillar 3 interim reporting as at that date to Lloyd’s.
5.2.2
The submission must address each of Guidelines 21 to 32 (excluding Guideline 26) as set out in
EIOPA’s Guidelines on Submission of Information to National Competent Authorities.
5.2.3
The objective of the interim qualitative information is to provide the supervisor with information on the
insurer’s system of governance, capital management and valuation of assets and liabilities. The
supervisor is interested in knowing the particular circumstances of each insurer in this respect. This
is explained further in paragraph 5.14 of the PRA’s SS4/13, repeated below:
‘The guidelines … include information about the areas relating to the system of governance for firms
and groups and capital management, in particular information on own funds and valuation for
solvency purposes. The PRA expects firms to include information at a point in time, related to the
submission reference date. Firms are also encouraged, where relevant, to indicate where further
development is expected as part of the firm’s preparations for compliance with Solvency II. The PRA
is willing to engage with firms to discuss how the firm’s developing Solvency II work in this area may
be used to meet current regulatory requirements, or support work being done in ICAS+ or IMAP
during the preparatory phase to reduce any potential for duplication.’
5.2.4
For syndicates, the qualitative information should be prepared in accordance with the Guidance
below. The Guidance tailors the requirements to Lloyd’s syndicates – there will be certain Guidelines
which do not or are unlikely to apply to syndicates.
5.2.5
As noted above, the interim qualitative reporting covers system of governance, capital management
and valuation of assets and liabilities.
5.2.6
System of governance (Guidelines 21 to 25 and 37) – it is expected that this material will already
have been prepared and maintained by managing agents as part of their compliance with the Pillar 2
requirements in respect of system of governance. It is not expected that agents will need to prepare
‘new’ material specifically for this purpose however it should be updated to show the status, eg
organisation chart, as at 31 December 2014.
5.2.7
Capital management (Guideline 28) – this covers details regarding the own funds of the syndicate.
This will generally always be Tier 1 basic own funds and explanatory information is only required if
this is not the case.
5.2.8
Valuation of assets and liabilities (Guidelines 29 to 32) – some of these requirements relate to the
Solvency II valuation rules provided by Lloyd’s which are common to all syndicates. These are thus
addressed at Lloyd’s level and do not need to be reported at syndicate level. However some of the
49
approaches, particularly regarding technical provisions, will be syndicate specific and analysis is
required as described under each Guideline, below.
5.2.9
The submission of the qualitative information to Lloyd’s shall be made on a freeform document which
should be submitted to Lloyd’s in PDF format as part of the Pillar 3 interim reporting i.e. as an
attachment in ASR990.
5.2.10 The document should set out each Guideline as a heading. For each Guideline, there should be a
brief description of how the requirements are covered. As set out in the detail below, most of the
Guidelines will be covered by existing documentation maintained by the managing agent. Thus in
this circumstance the explanation should reference the relevant supporting documents which should
also be provided within the PDF file.
5.2.11 For managing agents which manage more than one syndicate, it is possible that elements of the
qualitative submission may be identical across two or more syndicates. However, to facilitate review
purposes, it is necessary for each syndicate’s submission to ‘stand alone’ in this respect, ie the
elements of the submission common to more than one syndicate must be provided in each
syndicate’s submission.
5.2.12 The qualitative disclosures must be reported on by the managing agent in the ASR910; the wording
of this report reflects this.
50
Guideline 21: General governance requirements
Requirement (1.72)
Expectation from syndicates
a) Information allowing the national
competent authority to gain a good
understanding of the system of
governance within the undertaking, and
to assess its appropriateness to the
undertaking’s business strategy and
operations.
Article 41 (1) of the Solvency II Directive requires that:
‘Member States shall require all insurance and reinsurance
undertakings to have in place an effective system of
governance which provides for sound and prudent
management of the business. That system shall at least
include an adequate transparent organisational structure with
a clear allocation and appropriate segregation of
responsibilities and an effective system for ensuring the
transmission of information. It shall include compliance with
the requirements laid down in Articles 42 to 49.
The system of governance shall be subject to regular internal
review.’
This should already be the subject of documentation and
review, and Lloyd’s would expect agents to be able to provide
the following as evidence of their governance framework:
• Organisational structure showing accountability – i.e. board,
committees, decision making bodies and required functions
(actuarial, internal audit, compliance, risk management)
• Personnel organisation structure / function organisational
charts – i.e. resources
• Matters for the board including delegation to committees /
decision making bodies
• Terms of reference for the board and each committee /
decision making body including Committee membership (with
job title of the individual members)
• Board and committee timetable – detailing dates and outline
of agenda / matters to be discussed
• Management information (MI) – summary details of the MI
provided to the Board, committees and decision making
bodies.
The governance framework should clearly demonstrate
where the following activities are being considered and
decisions made:
• Underwriting
• Reinsurance
• Claims
• Reserving
• Investment management
51
Requirement (1.72)
• Asset liability management
• Liquidity and concentration management
• Operational risk
b) information relating to the undertaking's
delegation of responsibilities, reporting
lines and allocation of functions.
These requirements should be addressed in respect of each
committee, decision making body and required functions
(actuarial, internal audit, compliance, risk management). This
should have already been documented by the managing
agent as part of its system of governance.
c) The structure of the undertaking’s
administrative, management or
supervisory body, providing a description
of their main roles and responsibilities
and a brief description of the segregation
of responsibilities within these bodies, in
particular whether relevant committees
exist within them, as well as a description
of the main roles and responsibilities of
key functions held by such bodies.
An organisational structure should be provided showing
accountability – ie board, committees, decision making
bodies and required functions (actuarial, internal audit,
compliance, risk management).
Guideline 22: Fit and proper requirements
Requirement (1.73)
a) a list of the persons in the undertaking,
or external to the undertaking in the case
that the undertaking has outsourced key
functions that are responsible for key
functions.
This is self explanatory and should include those persons in
post as at the reporting date.
b) information on the policies and
processes established by the
undertaking to ensure that those persons
are fit and proper.
‘Fit and proper’ policies and procedures should be in place for
directors, senior staff and those holding key functions. Under
Solvency II key functions are those considered critical or
important in the system of governance and include at least
the risk management, compliance, internal audit and actuarial
functions. Other functions may be considered key functions
according to the nature, scale and complexity of the business
or the way it is organised.
The following may be regarded as evidence of procedures to
ensure the adequacy of skills and experience:

Fit and Proper Policy

Recruitment procedures

Performance review/appraisal process

Board evaluation process – including review and
52
Requirement (1.73)
mitigation

Training and CPD.
Guideline 23: Risk management system
Requirement (1.74)
a) A description of the undertaking’s risk
management system comprising
strategies, processes and reporting
procedures, and how it is able to
effectively identify, measure, monitor,
manage and report, on a continuous
basis, the risks on an individual and
aggregated level, to which the
undertaking is or could be exposed.
Article 41 (3) states that ‘Insurance and reinsurance
undertakings shall have written policies in relation to at least
risk management….’
The risk-management system shall cover at least the
following areas:
(a) underwriting and reserving;
(b) asset–liability management;
(c) investment, in particular derivatives and similar
commitments;
(d) liquidity and concentration risk management;
(e) operational risk management;
(f) reinsurance and other risk-mitigation techniques.
Thus the managing agent should already have documentation
in place which meets this requirement, notably a Risk
Management Framework or Policy document.
b) A description of how the risk
management system including the risk
management function are implemented
and integrated into the organisational
structure and decisionmaking processes
of the undertaking.
c) Information on the undertaking’s risk
management strategies, objectives,
processes and reporting procedures for
each category of risk, with an
explanation how these are documented,
monitored and enforced.
This simply covers documentation of the risk management
function and how it fits into the organisational and operational
structure of the managing agent.
The following may be regarded as existing evidence in
relation to this:

Risk Management Framework, Strategy or Policy

Individual Risk Category Policies
This is simply the documentation setting out, for each
category of risk, risk appetite and toleration, processes to
monitor and control risk, reporting of actual outcomes and
breaches against tolerances, and processes for taking
remedial action to bring the risk back to within tolerance. This
includes explaining the governance process, including
responsibility for decision making, reporting lines and
oversight.
relation to this:
53
Requirement (1.74)
d) Information on how the undertaking fulfils
its obligation related to the 'prudent
person principle' as set out in the
Guidelines 22 to 30 on the System of
Governance.


The ‘prudent person principle’ is set out in Article 131 of the
Solvency II Directive. The managing agent should have a
written investment policy which should demonstrate how the
agent complies with these requirements.
A managing agent must define its investment policy in line
with what a competent, prudent and expert manager would
apply in order to pursue the chosen investment strategy.
The investment policy must:
• Take into account the syndicate's business, its overall risk
tolerance levels, long-term risk versus performance
requirements, its solvency position and its gross and net
underlying asset exposures.
• If an agent uses derivative products or investment
instruments with the characteristics of derivatives, its
investment policy must take into account their purpose in the
portfolio, their contribution to efficient portfolio management,
the procedures in place to evaluate their suitability for
purpose and the risk management principles applied.
• Consider how to prudently manage liquidity risk in the short,
medium and long term, taking into account investment
strategy, underwriting strategy and claims management
strategy
• Include quantitative limits on assets or exposures, including
off-balance sheet exposures.
• Include special management, monitoring and control
procedures, in particular in relation to investments not
quoted in a market and to complex structured products.
e) Information on how the undertaking
verifies the appropriateness of credit
assessments from external credit
assessments institutions including how
and the extent to which credit
assessments institutions are used.
An agent’s risk management framework must be capable of
identifying, mitigating and measuring credit risk, according to
internally defined limits.
Credit ratings should be monitored and probabilities of default
evaluated, including for unrated exposures.
Exposure to speculative assets should be limited and
syndicates with significant exposure to assets bearing credit
risk should be capable of hedging that exposure.
The agent should have written policies, as part of their Risk
Management System, which set out which external ratings
agents are used to assist the agent in this function, the extent
54
Requirement (1.74)
to which reliance is place upon them, including whether their
assessments are compared against internal assessments of
the credit rating.
Guideline 24: Internal control system
Requirement (1.75)
a) A description of the undertaking’s
internal control system.
A managing agent’s internal control system must secure its
compliance with applicable laws, regulations and
administrative processes and the effectiveness and efficiency
of operations in view of its objectives, as well as the
availability and reliability of financial and non-financial
information.
The managing agent must have in place a suitable control
environment, appropriate control activities, effective
information and communication procedures and adequate
monitoring mechanisms.
The agent should already have documented this, most likely
through an Internal Control Policy and should provide this
information in response to this requirement.
b) Information on the key procedures that
the internal control system includes.
This is documentation of the key processes that the agent
operates within its internal control system. This is likely to be
documented within an Internal Control Policy or broader Risk
Management Framework documentation.
c) A description of how the compliance
function is implemented.
Agents may provide the following as evidence of the role and
operation of their compliance function:
• Terms of reference / framework detailing the operation of
the compliance function within the business eg unfettered
access, reporting structure.
• Compliance plan – this should detail the timetable of
compliance activities undertaken by the function on a “risk
based” approach
• Compliance report to Board – should include report on
compliance with laws, regulations and administrative
provisions from regulators (including Lloyd’s) and possible
impact of changes in the legal environment and the
assessment of compliance risk.
55
Guideline 25: Additional information on system of governance
Requirement (1.76)
Any other material information regarding the
insurance and reinsurance undertaking’s
system of governance.
It is not expected that anything is reported here.
Guideline 26: System of governance – groups (not applicable)
Guideline 27: Governance structure
Requirement (1.79)
An organisational chart indicating the
positions of key function holders.
This is self explanatory. ‘Key functions’ include at least the
risk management, compliance, internal audit and actuarial
functions.
Guideline 28: Own funds
Requirement (1.80/1.81)
1.80 (a) A quantitative and qualitative
explanation of any material differences
between equity as shown in the undertaking’s
financial statements and the excess of
assets over liabilities as calculated for
solvency purposes.
The quantitative information can be addressed as a summary
of information reported in the ASR002 showing the UK GAAP
and Solvency II numbers.
1.80 (b) Information on the structure, amount
and quality of basic own funds and ancillary
own funds.
For a syndicate, the excess of assets over liabilities, ie the
amount attributable to members including funds in syndicate
(FIS) will be Tier 1 basic own funds.
The agent should provide a short narrative explanation as to
the movement in equity, summarising these differences.
This will be the same for every syndicate and thus the
syndicate is not required to state this in this submission.
If this is not the case, an explanation as to why the own funds
do not meet this criteria, setting out which tiering they are
assigned to and quantifying the amounts should be provided.
1.81 (a) How the group’s own funds have
been calculated net of any intragroup
transactions, including intragroup
transactions with undertakings of other
financial sectors.
This is not applicable for a syndicate.
1.81 (b) The nature of the restrictions to the
transferability and fungibility of own funds in
the related undertakings, if any.
56
Guideline 29: Valuation of assets
Requirement (1.82)
a) Separately for each material class of
assets, the value of the assets as well as
a description of the bases, methods and
main assumptions used for valuation for
solvency purposes.
The quantitative information can be addressed as a
summary of information reported in the ASR002 showing the
UK GAAP and Solvency II numbers.
b) Separately for each material class of
assets, a quantitative and qualitative
between the bases, methods and main
assumptions used by the undertaking for
the valuation for solvency purposes and
those used for their valuation in financial
statements.
The agent should provide a short narrative explanation
summarising these differences.
Guideline 30: Valuation of technical provisions
1.83 (a) Separately for each material line of
business the value of technical provisions,
including the amount of the best estimate
and the risk margin, as well as a description
of the bases, methods and main
assumptions used for their valuation for
solvency purposes.
A quantitative summary of the technical provisions as
described should be provided for each material line of
business as used to run the syndicate (ie not necessarily the
Solvency II classes of business) should be provided. If the
syndicate’s ‘material lines of business’ are the same as the
Solvency II classes of business then this should be
referenced in the narrative, and a reference made to the
ASR240 disclosures which in this case would not need to be
repeated here.
The qualitative description of the bases, methods and main
assumptions used for their valuation for solvency purposes
will be common to all syndicates and thus need not be
provided at syndicate level. This shall be addressed in
Lloyd’s qualitative reporting. However the agent should
disclose any additional information regarding their valuation
approach where relevant and material to assisting Lloyd’s in
understanding this.
1.83 (b) A description of the level of
uncertainty associated with the amount of
technical provisions.
This should be sourced from existing material prepared by
the agent for instance in provision to the Board when
approving the level of technical provisions.
1.83 (c) Separately for each material line of
business, a quantitative and qualitative
57
assumptions used by the undertaking for the
valuation for solvency purposes and those
used for their valuation in financial
statements.
Solvency II classes of business) should be provided.
1.83 (d) A description of the recoverables
from reinsurance contracts and special
purpose vehicles.
This is a quantification of amounts recoverable (separately)
from reinsurance contracts and special purpose vehicles by
material line of business consistent with the quantitative
analysis provided to address the above requirements.
1.84 Details of the relevant actuarial
methodologies and assumptions used in the
calculation of the technical provisions
including details of any simplification used in
the calculation of the technical provision,
including deriving the risk margin and its
allocation to the single lines of business and
including a justification that the method
chosen is proportionate to the nature, scale
and complexity of risks.
The agent should provide a description of the approaches
used eg chain ladder, Bornhuetter Ferguson etc, calculation
of ENIDs (binary events) etc. This should be capable of
being sourced from the agent’s existing procedures for the
calculation of Solvency II technical provisions and/or the
information contained in the actuarial function report. This
must be provided by material line of business (ie consistent
with Requirement 1.83).
understanding this.
Guideline 31: Valuation of other liabilities
Requirement (1.85)
(a) Separately for each material class of
other liabilities the value of other
liabilities as well as a description of the
bases, methods and main assumptions
used for their valuation for solvency
purposes.
(b) Separately for each material class of
other liabilities, a quantitative and
qualitative explanation of any material
differences with the valuation bases,
methods and main assumptions used by
the undertaking for the valuation for
solvency purposes and those used for
their valuation in financial statements.
58
Guideline 32: Other information relating to valuation of assets and liabilities
Requirement (1.86 to 1.88)
1.86 Any other material information regarding
the insurance and reinsurance undertaking’s
valuation of assets and liabilities for solvency
purposes.
It is not expected that anything shall be reported in respect of
this item.
1.87 A description of:
Managing agents should explain the future management
actions assumed in their determination of technical provisions
and capital. This may include, for example, the future
purchase of reinsurance or future changes to the business
profile. Assumptions should be realistic and verifiable based
on historical experience or current business practice and
strategy.
a) the relevant assumptions about future
management actions, and
b) the relevant assumptions about
policyholders’ behaviour.
‘Policyholders’ behaviour’ typically applies with respect to
investment-linked life insurance products which are not
underwritten at Lloyd’s and is thus not applicable.
1.88 In cases where mark to model
techniques are used: information on:
a) identification of the assets and liabilities
to which that valuation approach applies;
b) justification of the use of that valuation
approach for the assets and liabilities
referred to in a);
c) documentation of the assumptions
underlying that valuation approach and;
The managing agent should have written procedures with
respect to the valuation of assets and liabilities under
Solvency II.
These will include asset and liability classes where modelling
techniques are used to quantify the value. This will typically
be in respect of technical provisions (gross and reinsurers’
share) but may include other asset/liability classes.
These written procedures should be provided in response to
this requirement.
d) assessment of the valuation uncertainty
of the assets and liabilities referred to in
a).
59
Complementary Identification Code (CIC) table (as issued by EIOPA)
Appendix 1
First 2
positions
Asset listed
in
Third
position
Category
Fourth
position
Subcategory or
main risk
ISO 3166-1-alpha-2 country code or XL (for not listed) or XT (for not exchange tradable)
1
Government bonds
2
Corporate bonds
3
Equity
4
Investment
funds
5
Structured
notes
6
Collateralised
securities
7
Cash and deposits
1
1
1
1
1
1
1
Central Government
bonds
Corporate bonds
Common equity
Equity funds
Equity risk
Equity risk
Cash
8
Mortgages and loans
9
Property
1
Uncollateralized loans
made
A
Futures
B
Call Options
C
Put Options
D
Swaps
E
Forwards
F
Credit
derivatives
1
1
1
1
1
1
1
Property (office and
commercial)
Equity and index
futures
Equity and index
options
Equity and index
options
Interest rate swaps
Forward interest
rate agreement
Credit default
swap
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
Convertible bonds
Debt funds
Interest rate risk
Interest rate risk
Loans made collateralized
with securities
Property
(residential)
Interest rate futures
Bond options
Bond options
Currency swaps
Forward exchange
rate agreement
Credit spread
option
3
3
3
Transferable
deposits (cash
equivalents)
3
Money market
funds
Currency risk
Currency risk
Other deposits
3
3
Equity of real
estate related
corporation
3
Regional government
bonds
Commercial paper
Equity rights
short term
(less than one
year)
4
4
4
4
4
4
4
4
Municipal
government bonds
Money market
instruments
Preferred equity
Asset allocation
funds
Credit risk
Credit risk
Other deposits with
term longer than one
year
Mortgages
5
5
5
5
5
5
Treasury bonds
Hybrid bonds
Real estate funds
Real estate risk
Real estate risk
Deposits to cedants
5
3
3
3
3
3
3
Property (for own
use)
Currency futures
Currency options
Currency options
Interest rate and
currency swaps
Credit spread
swap
4
4
4
4
(under
construction)
Warrants
Warrants
Total return swap
5
5
Property
5
5
Other collateralized loans
Plant and
Commodity futures Commodity options Commodity options
made
equipment (for own
use)
6
6
6
5
Security swaps
6
6
6
6
6
Covered bond
Common covered
bonds
7
Alternative funds
Commodity risk
Commodity risk
7
7
7
7
7
7
7
7
Covered bonds
subject to specific law
Private equity
funds
Catastrophe and
Weather risk
Catastrophe and
Weather risk
Catastrophe and
Weather risk
Catastrophe and
Weather risk
Catastrophe and
Weather risk
Catastrophe and
Weather risk
Catastrophe and
Weather risk
Loans on policies
Swaptions
Swaptions
8
8
8
8
8
8
8
8
8
Subordinated bonds
Mortality risk
Mortality risk
Mortality risk
Mortality risk
Mortality risk
Mortality risk
Mortality risk
9
9
9
9
9
9
9
9
9
9
9
Other
Other
Other
Other
Other
Other
Other
Other
Other
Other
Other
9
9
9
Infrastructure
funds
9
Other
Other
Other
Other
Definition of CIC (as issued by EIOPA)
Assets listed in
Country
ISO 3166-1-alpha-2 country code
XL
Assets that are not listed in a stock exchange
XT
Assets that are not exchange tradable
1
Government bonds
Definition
Identify the country ISO code where the asset is listed in. An asset is considered as being listed if it is negotiated on a regulated market or on a
multilateral trading facility, as defined by Directive 2004/39/EC. If the asset is listed in more than one country, the country should be the one used as the
reference for valuation purposes
Identify assets that are not negotiated on a regulated market or on a multilateral trading facility, as defined by Directive 2004/39/EC
Identify assets that by their nature are not subject to negotiation be negotiated on a regulated market or on a multilateral trading facility, as defined by
Directive 2004/39/CE. This applies to asset categories 7, 8 and 9
Category
Definition
Bonds issued by public authorities, whether by central governments supra-national government institutions, regional governments or municipal
governments
Bonds issued by central governments
11
Central Government bonds
12
13
Regional government bonds
Bonds issued by public institutions established by a commitment between national states, e.g. issued by a multilateral development bank as listed in Annex
VI, Part 1, Number 4 of the Capital Requirements Directive (2006/48/EC) or issued by an international organisation listed in Annex VI, Part 1, Number 5 of
the Capital Requirements Directive (2006/48/EC)
Regional government or autonomous communities debt instruments offered to the public in a public offering on the capital market
14
Municipal government bonds
Bonds issued by municipalities, including cities, provinces, districts and other municipal authorities
15
Treasury bonds
Short term government bonds, issued by central governments (issued with a maturity term up to 1 year)
16
Covered bonds
Government bonds which have a pool of assets that secures or "covers" the bond. Those assets remain on the issuer balance sheet.
Other
Other government bonds, not classified under the above categories
19
2
Corporate bonds
Bonds issued by corporations
21
Corporate bonds
22
Convertible bonds
23
Commercial paper
24
Money market instruments
Very short term debt securities (usualy with maturities ranging form 1 day up to 1 year), consisting mainly of negotiable certificates of deposit (CDs),
bankers acceptances, repurchase agreements (repos) and other highly liquid instruments. Commercial Paper is excluded from this category
25
Hybrid bonds
Corporate bonds that have debt and equity-like features, but are not convertible.
26
Common covered bonds
Corporate bonds which have a pool of assets that secures or "covers" the bond. Those assets remain on the issuer balance sheet. Covered bonds subject to
specific law are excluded from this category
27
Covered bonds subject to specific law
Corporate bonds which have a pool of assets that secures or "covers" the bond if the originator becomes insolvent and are subject by law to special public
supervision designed to protect bond-holders, as definid in Article 22(4) of Directive 85/611/EEC.
An example of this category is Pfandbrief: "Covered bonds which are issued on the basis of the Pfandbrief Act. They are used to refinance loans for which
collateral is furnished in the form of loans secured by real estate liens (Mortgage Pfandbriefe), public-sector loans (Public Pfandbriefe), ship mortgages (Ship
Pfandbriefe) or aircraft mortgages (Aircraft Pfandbriefe). Thus, the distinction made between these Pfandbrief types refers to the cover pool created for
each type of Pfandbrief."
28
Subordinated bonds
Corporate bonds which have a lower priority than other bonds of the issuer in case of liquidation.
29
Other
Other corporate bonds, with other characteristics than the ones identified in the above categories
3
Equity
Bonds issued by corporations, with simple characteristics, usually covering the ones referred to as "plain vanilla", and that don't have any special feature
described in the categories 22 to 28
Corporate bonds that the holder can convert into shares of common stock in the issuing company or cash of equal value, having debt and equity-like
features
Unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories and meeting short-term
liabilities, usualy with original maturity lesser than 270 days.
Shares and other securities equivalent to shares representing corporations' capital, i.e., representing ownership in a corporation
31
Common equity
Equity that represents basic property rights on corporations
32
Equity of real estate related corporation
Equity representing capital from real estate related corporations
33
Equity rights
Rights to subscribe to additional shares of equity at a set price
34
Preferred equity
Equity security that is senior to common equity, having a higher claim on the assets and earnings than common equity, but is subordinate to bonds
Other
Other equity, not classified under the above categories
39
4
Investment funds
41
Equity funds
Investment funds mainly invested in equity
42
Debt funds
Investment funds mainly invested in bonds
43
Money market funds
Investment funds mainly invested in money market instruments
44
Asset allocation funds
Fund which invests its assets pursuing a specific asset allocation objective, e.g. primarily investing in the securities of companies in countries with nascent
stock markets or small economies, specific sectors or group of sectors, specific countries or other specific investment objective
45
Real estate funds
Investment funds mainly invested in real estate
46
Alternative funds
Funds whose investment strategies include such as hedging, event driven, fixed income directional and relative value, managed futures, commodities etc.
47
Private equity funds
Investment funds used for making investments in equity securities following strategies associated with private equity.
48
Infrastructure funds
Funds that invest in utilities such as toll roads, bridges, tunnels, ports and airports, oil and gas distribution, electricity distribution and social infrastructure
such as healthcare and educational facilities
Other investment funds, not classified under the above categories
49
Other
Undertakings the sole purpose of which is the collective investment in transferrable securities and/or in other financial assets
5
Structured notes
Hybrid securities, combining a fixed income instrument with a series of derivative components. Excluded from this category are fixed income securities
that are issued by sovereign governments. Concerns securities that have embedded one or a combination of categories of derivatives, including Credit
Default Swaps (CDS), Constant Maturity Swaps (CMS), Credit Default Options (CDOp). Assets under this category are not subject to unbundling
51
Equity risk
Structured notes mainly exposed to equity risk
52
Interest rate risk
Structured notes mainly exposed to interest rate risk
53
Currency risk
Structured notes mainly exposed to currency risk
54
Credit risk
Structured notes mainly exposed to credit risk
Assets listed in
Definition
55
Real estate risk
Structured notes mainly exposed to real estate risk
56
Commodity risk
Structured notes mainly exposed to commodity risk
57
Catastrophe and Weather risk
Structured notes mainly exposed to catastrophe or weather risk
58
Mortality risk
Structured notes mainly exposed to mortality risk
59
Other
Other structured notes, not classified under the above categories
6
61
Equity risk
Securities whose value and payments are derived from a portfolio of underlying assets. Includes Asset Backed Securities (ABS), Mortgage Backed
securities (MBS), Commercial Mortgage Backed securities (CMBS), Collateralised Debt Obligations (CDO), Collateralised Loan Obligations (CLO) ,
Collateralised Mortgage Obligations (CMO). Assets under this category are not subject to unbundling
Collateralised securities mainly exposed to equity risk
62
Interest rate risk
Collateralised securities mainly exposed to interest rate risk
63
Currency risk
Collateralised securities mainly exposed to currency risk
64
Credit risk
Collateralised securities mainly exposed to credit risk
65
Real estate risk
Collateralised securities mainly exposed to real estate risk
66
Commodity risk
Collateralised securities mainly exposed to commodity risk
67
Collateralised securities mainly exposed to catastrophe or weather risk
68
Mortality risk
Collateralised securities mainly exposed to mortality risk
69
Other
Other collateralised securities, not classified under the above categories
7
Collateralised securities
Cash and deposits
Money in the physical form, bank deposits and other money deposits
71
Cash
Notes and coins in circulation that are commonly used to make payments
72
Transferable deposits (cash equivalents)
73
Other deposits short term (less than one year)
Deposits exchangeable for currency on demand at par and which are directly usable for making payments by cheque, draft, giro order, direct debit/credit,
or other direct payment facility, without penalty or restriction
Deposits other than transferable deposits, with remaining maturity inferior to 1 year, that cannot be used to make payments at any time and that are not
exchangeable for currency or transferable deposits without any kind of significant restriction or penalty
74
Other deposits with term longer than one year
Deposits other than transferable deposits, with remaining maturity superior to 1 year, that cannot be used to make payments at any time and that are not
exchangeable for currency or transferable deposits without any kind of significant restriction or penalty
75
Deposits to cedants
Deposits relating to reinsurance accepted
79
Other
Other cash and equivalents, not classified under the above categories
8
81
Mortgages and loans
Financial assets created when creditors lend funds to debtors, with collateral or not, including cash pools.
Loans made without collateral
82
Uncollateralized loans made
Loans made collateralized with securities
84
Mortgages
Loans made with collateral in the form of real estate
85
Other collateralized loans made
Loans made with collateral in any other form
86
Loans on policies
Loans made with insurance policies as collateral
89
Other
Other mortgages and loans, not classified under the above categories
9
Property
Loans made with collateral in the form of financial securities
Buildings, land, other constructions that are immovable and equipment
91
Property (office and commercial)
Office and commercial building used for investment
92
Property (residential)
Residential buildings used for investment
93
Property (for own use)
Real estate for the own use of the undertaking
94
Property (under construction)
Real estate that is under construction, for future own usage or future usage as investment
95
Plant and equipment (for own use)
Plant and equipment for the own use of the undertaking
99
Other
Other real estate, not classified under the above categories
A
Futures
A1
Equity and index futures
Standardised contract between two parties to buy or sell a specified asset of standardised quantity and quality at a specified future date at a price
agreed today
Futures with equity or stock exchange indices as underlying
A2
Interest rate futures
Futures with bonds or other interest rate dependent security as underlying
A3
Currency futures
Futures with currencies or other currencies dependent security as underlying
A5
Commodity futures
Futures with commodities or other commodities dependent security as underlying
A7
Futures mainly exposed to catastrophe or weather risk
A8
Mortality risk
Futures mainly exposed to mortality risk
A9
Other
Other futures, not classified under the above categories
B
Call Options
B1
Equity and index options
Contract between two parties concerning the buying of an asset at a reference price during a specified time frame, where the buyer of the call option
gains the right, but not the obligation, to buy the underlying asset
Call options with equity or stock exchange indices as underlying
B2
Bond options
Call options with bonds or other interest rate dependent security as underlying
B3
Currency options
Call options with currencies or other currencies dependent security as underlying
B4
Warrants
Call options that entitles the holder to buy stock of the issuing company at a specified price
B5
Commodity options
Call options with commodities or other commodities dependent security as underlying
B6
Swaptions
B7
Call options granting its owner the right but not the obligation to enter into a long position in an underlying swap, i.e., enter into a swap where the owner
pays the fixed leg and receive the floating leg
Call options mainly exposed to catastrophe or weather risk
B8
Mortality risk
Call options mainly exposed to mortality risk
B9
Other
Other call options, not classified under the above categories
C
Put Options
C1
Equity and index options
Contract between two parties concerning the selling of an asset at a reference price during a specified time frame, where the buyer of the put option
gains the right, but not the obligation, to sell the underlying asset
Put options with equity or stock exchange indices as underlying
C2
Bond options
Put options with bonds or other interest rate dependent security as underlying
C3
Currency options
Put options with currencies or other currencies dependent security as underlying
C4
Warrants
Put options that entitles the holder to sell stock of the issuing company at a specified price
Assets listed in
Definition
C5
Commodity options
Put options with commodities or other commodities dependent security as underlying
C6
Swaptions
C7
Put options granting its owner the right but not the obligation to enter into a short position in an underlying swap, i.e., enter into a swap in which the
owner will receive the fixed leg, and pay the floating leg
Put options mainly exposed to catastrophe or weather risk
C8
Mortality risk
Put options mainly exposed to mortality risk
C9
Other
Other put options, not classified under the above categories
D
D1
Interest rate swaps
Contract in which counterparties exchange certain benefits of one party's financial instrument for those of the other party's financial instrument, and the
benefits in question depend on the type of financial instruments involved
Swap that exchange interest flows
D2
Currency swaps
Swap that exchange currency
D3
Interest rate and currency swaps
Swap that exchange interest and currency flows
D5
Security swaps
Swap that exchange securities
D7
Swaps mainly exposed to catastrophe or weather risk
D8
Mortality risk
Swaps mainly exposed to mortality risk
D9
Other
Other swaps, not classified under the above categories
E
Swaps
Forwards
Non-standardised contract between two parties to buy or sell an asset at a specified future time at a price agreed today
E1
Forward interest rate agreement
E2
Forward exchange rate agreement
E7
Forward contract in which typicaly one party pays a fixed interest rate, and receives a variable interest rate usualy based on an underlying index rate, at the
predefined forward date
Forward contract in which one party pays an amount in one currency, and receives an equivalent amount in a different currency resulting from the
conversion using the contractual exchange rate, at the predefined forward date
Forwards mainly exposed to catastrophe or weather risk
E8
Mortality risk
Forwards mainly exposed to mortality risk
E9
Other
Other forwards, not classified under the above categories
F
Credit derivatives
Derivative whose value is derived from the credit risk on an underlying bond, loan or any other financial asset
F1
Credit default swap
Credit derivative transaction in which two parties enter into an agreement whereby one party pays the other a fixed periodic coupon for the specified life
on the agreement and the other party makes no payments unless a credit event relating to a predetermined reference asset occurs
F2
Credit spread option
Credit derivative that will generate cash flows if a given credit spread between two specific assets or benchmarks changes from its current level
F3
Credit spread swap
F4
Total return swap
A swap in which one party makes a fixed payment to the other on the swap's settlement date and the second party pays the first an amount based on the
actual credit spread
A swap in which the non-floating rate side is based on the total return of an equity or fixed income instrument with the life longer that the swap
F9
Other
Other credit derivatives, not classified under the above categories
Appendix 2
Syndicate - Agent
002 - Overall Balance sheet
Period: All Years of Account Combined
ASR ???? Edition X
Mapping of Statutory
Accounts to QMA2
(Column C)
Assets
1 Goodwill
2 Deferred acquisition costs
3 Intangible assets
4 Deferred tax assets
5 Pension benefit surplus
6 Property, plant & equipment held for own use
Investments (other than assets held for index-linked and unit-linked funds)
7 Property (other than for own use)
8 Participations
Equities
9 Equities - listed
10 Equities - unlisted
11 Sub-total (9 to 10)
Bonds
12 Government bonds
13 Corporate bonds
14 Structured notes
15 Collateralised securities
Investment funds
17 Equity funds
18 Debt funds
19 Money market funds
20 Asset allocation funds
21 Real estate funds
22 Alternative funds
23 Private equity funds
24 Infrastructure funds
25 Other
26
27
28
29
Sub-total (17 to 25)
Derivatives
Deposits other than cash equivalents
Other investments
Sub-total of investments (other than assets held for index-linked and unit-linked funds) (7 to
30 8 +11+16+26+27+28+29)
31 Assets held for index-linked and unit-linked funds
Loans & mortgages (except loans on policies)
32 Loans & Mortgages to individuals
33 Other Loans & Mortgages
34 Loans on policies
Non-life and health similar to non-life
36 Non-life excluding health
37 Health similar to non-life
Life and health similar to life, excluding health and index-linked and unit-linked
39 Health similar to life
40 Life excluding health and index-linked and unit-linked
42 Life index-linked and unit-linked
43 Sub-total Reinsurance recoverables (38+41+42)
44 Deposits to cedants
45 Insurance & intermediaries receivables
46 Reinsurance receivables
47 Receivables (trade, not insurance)
48 Own shares
Solvency II value
A
Statutory Accounts valuation basis
B
N/A
28
N/A
N/A
N/A
22
+
+
+
+
+
+
+
+
+
+
+
+
7
N/A
+
+
+
+
+
+
A9+A10
+
+
B9+B10
+
+
+
+
A12+A13+A14+A15
+
+
+
+
B12+B13+B14+B15
1, 6, 24
1, 6, 24
2, 6, 24
2, 6, 24
2, 6, 7, 24
2, 6, 7, 24
1, 3, 6 & 24
1, 3, 6 & 24
1, 3, 6 & 24
1, 3, 6 & 24
1, 3, 6 & 24
1, 3, 6 & 24
1, 3, 6 & 24
1, 3, 6 & 24
1, 3, 6 & 24
7
5
7
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
Analysis cell
Analysis cell
A17+A18+A19+A20+A21+A22+A23+A24+A2
5
B17+B18+B19+B20+B21+B22+B23+B24+B25
+
+
+
+
Analysis cell
Analysis cell
A7+A8+A11+A16+A26+A27+A28+A29
+
B7+B8+B11+B16+B26+B27+B28+B29
+
4
4
N/A
+
+
+
A32+A33+A34
+
+
+
B32+B33+B34
13
13
+
+
A36+A37
+
+
B36+B37
13
13
+
+
A39+A40
+
A38+A41+A42
+
+
+
+
+
+
+
B39+B40
+
B38+B41+B42
+
+
+
+
+
N/A
N/A
9
14 & 18
15 & 19
16 & 20
N/A
49 Amounts due in respect of own fund items or initial fund called up but not yet paid in
50 Cash and cash equivalents
51 Any other assets, not elsewhere shown
N/A
5, 23 & 24
25, 27 & 29
52 Total assets (1 to 6 +30+31+35+ 43 to 51)
Liabilities
Technical provisions – non-life (excluding health)
53 TP calculated as a whole
54 Best Estimate
55 Risk margin
Technical provisions - health (similar to non-life)
58 Best Estimate
59 Risk margin
Technical provisions - health (similar to life)
62 Best Estimate
63 Risk margin
Technical provisions – life (excluding health and index-linked and unit-linked)
66 Best Estimate
67 Risk margin
Technical provisions – index-linked and unit-linked
70 Best Estimate
71 Risk margin
73 Other technical provisions
74 Contingent liabilities
75 Provisions other than technical provisions
76 Pension benefit obligations
77 Deposits from reinsurers
78 Deferred tax liabilities
79 Derivatives
80 Debts owed to credit institutions
81 Financial liabilities other than debts owed to credit institutions
82 Insurance & intermediaries payables
83 Reinsurance payables
84 Payables (trade, not insurance)
85 Subordinated liabilities not in BOF
86 Subordinated liabilities in BOF
87 Any other liabilities, not elsewhere shown
31
88 Total liabilities (56+60+64+68+72 to 87)
32 & 52
89 Excess of assets over liabilities
32
+
+
+
Analysis cell
+
Analysis cell
A3+A4+A5+A6+A30+A31+A35+A43+A44+A4 B1+B2+B3+B4+B5+B6+B30+B31+B35+B43+
5+A46+A47+A48+A49+A50+A51
B44+B45+B46+B47+B48+B49+B50+B51
33 & 34
N/A
N/A
+
+
+
A53+A54+A55
+
+
+
B53
33 & 34
N/A
N/A
+
+
+
A57+A58+A59
+
+
+
B57
33 & 34
N/A
N/A
+
+
+
A61+A62+A63
+
+
+
B61
33 & 34
N/A
N/A
+
+
+
A65+A66+A67
+
+
+
B65
+
+
+
A69+A70+A71
+
+
+
+
+
+
+
+
+
+
+
+
+
+
Analysis cell
A56+A60+A64+A68+A72+A74+A75+A76+A7
7+A78+A79+A80+A81+A82+A83+A84+A85+
A86+A87
+
+
+
B69
+
+
+
+
+
+
+
+
+
+
+
+
+
+
Analysis cell
B56+B60+B64+B68+B72+B73+B75+B76+B77
+B78+B79+B80+B81+B82+B83+B84+B85+B8
6+B87
A52-A88
B52-B88
N/A
N/A
N/A
35
N/A
37
N/A
38
N/A
43 & 49
42 & 48
41 & 47
39 & 45
40 & 46
43 & 49
N/A
N/A
51
ANNUAL SOLVENCY RETURN (ASR) /
ANNUAL ASSET DATA (AAD)
INSTRUCTIONS
DECEMBER 2014
Version 1.0
1
Contents
Pages
3
Section 2: General Instructions
7
Section 3: Form Instructions for Annual
Solvency Return (ASR)
12
Section 4: Form Instructions for Annual Asset Data (AAD)
34
Section 5: Qualitative Reporting
49
Appendices
1. EIOPA Complementary Identification Code (CIC) Table
2. Mapping of SII Balance Sheet to QMA002
3. Managing agent’s reports – ASR910 and AAD910
2
1.1
Introduction
1.1.1
The PRA’s Supervisory Statement SS4/13 applies the requirements of EIOPA’s preparatory
guidelines to all PRA authorised firms falling within the scope of Solvency II. Among other things, it
requires the submission of interim Pillar 3 reporting to the PRA as at 31 December 2014 and
30 September 2015. This represents a part of the UK insurance industry’s preparations towards full
Solvency II compliance.
1.1.2
Accordingly, Lloyd’s will be required to submit to PRA, quantitative and qualitative data in respect of
the ‘association of underwriters known as Lloyd’s’ in aggregate. This shall be achieved by collecting
returns from managing agents in respect of each syndicate, and then aggregating this data with that
held centrally in respect of the Corporation, Central Fund and members’ funds at Lloyd’s.
1.2
Solvency II
1.2.1
It is confirmed that the Solvency II regime shall be implemented from 1 January 2016, with the
passing of the Omnibus II Directive (OMD II) by the European Parliament earlier this year. OMD II
confirms the high level legislative framework, including the Solvency II start date and certain
transitional measures, by making modifications to the original Solvency II Directive.
1.2.2
The next step in the completion of the legislative framework is the finalisation of the Level 2
measures, now known as Delegated Acts. The final text of these is currently being considered by the
European Parliament. Finalisation (i.e. adoption by the European Parliament) and publication of
these is expected in early 2015.
1.2.3
Finally, the European Insurance and Occupational Pensions Authority (EIOPA) is completing its work
on drafting the Level 3 measures, which will take the form of Implementing Technical Standards
(ITS) and Guidelines. EIOPA has already issued Guidelines on provision of information to national
supervisory authorities, which among other things introduces interim quantitative and Pillar 3
reporting as at 31 December 2014 and 30 September 2015. EIOPA is consulting on two broader set
of ITS and Guidelines; this includes a consultation on the Pillar 3 ITS, which shall cover the final
forms of quantitative and qualitative reporting, from December 2014 to February 2015, within Set 2.
The final Set 2 material shall be published in July 2015.
1.2.4
Lloyd’s shall review the final Set 2 requirements in advance of publishing its final requirements for
Pillar 3 quantitative and qualitative reporting, in Q3 2015. This shall address the full qualitative
reporting required from 2016 onwards.
1.3
Pillar 3 reporting
1.3.1
Pillar 3 represents the supervisory reporting and disclosure requirements under Solvency II.
Insurers are required to provide information, both for public disclosure and for private reporting to the
supervisor, on a quarterly and annual basis. This is necessary to enable a harmonised approach to
supervision across the European Union as well as improving the consistency of publicly disclosed
information.
1.3.2
The Pillar 3 requirements include annual and quarterly quantitative reporting (the completion of
standardised templates). In addition, the annual supervisory reporting requirements include an
element of qualitative reporting, which insurers are required to submit with their public Solvency and
Financial Condition Report (SFCR) as well as the private Regular Supervisory Report (RSR).
3
1.3.3
However, the EIOPA Guidelines on provision of information to national supervisory authorities
introduce the requirement to report on a sub-set of the quantitative templates as well as aspects of
qualitative reporting – specifically on systems of governance, capital management and valuation of
assets and liabilities – as part of the interim reporting.
1.4
Application at Lloyd’s
1.4.1
Solvency II applies to Lloyd’s as a single undertaking – the ‘association of underwriters known as
Lloyd’s’ – as defined within the Solvency II Directive. However, within this, Lloyd’s expects each
managing agent to meet the full set of Solvency II tests and standards. In addition, the PRA expects
that the supervisory reporting requirements for each syndicate at Lloyd’s are consistent with treating
it as ‘any other insurer’. Therefore managing agents are required to complete Solvency II Pillar 3
returns to Lloyd’s on a similar basis to other European Union insurers.
1.4.2
The basis of Lloyd’s Pillar 3 reporting to the PRA is that Lloyd’s provides a SFCR, RSR and
quantitative reporting templates to the PRA. These returns are prepared from an aggregation of
syndicate level returns made to the PRA, together with the additional data held by the Corporation, in
respect of the Corporation and Central Fund, and members’ funds at Lloyd’s.
1.4.3
This basis of submitting to the PRA affects the timetable for syndicates reporting to Lloyd’s. In order
to provide Lloyd’s with sufficient time to review and aggregate the syndicate level data, as well as
adding the data held centrally, go through Lloyd’s governance process and expected audit
requirements (only anticipated in respect of some of the annual data under ‘full’ Solvency II), it is
necessary for Lloyd’s to collect returns from syndicates in advance of Lloyd’s (and other insurers’)
submission deadline to the PRA.
1.4.4
The syndicates and Lloyd’s deadlines for compliance with Pillar 3 requirements are summarised
below (shown in weeks after the reporting date):
Interim reporting
Solvency II
4
1.5
Quantitative data requirements
1.5.1
Managing agents will be required to submit data as at 31 December 2014 and 30 September 2015.
1.5.2
The data at as 31 December 2014 must be submitted using the Annual Solvency Return
(ASR)/Annual Asset Data (AAD) provided within Lloyd’s Core Market Return (CMR) system. The
returns must be submitted to Lloyd’s by 2pm, 16 April 2015.
1.5.3
The data as at 30 September 2015 must be submitted using the Quarterly Solvency Return
(QSR)/Quarterly Asset Data (QAD) within the CMR system. Some of the forms required for the 31
December 2014 submission are not required as at 30 September 2015 and are shown as ‘N/A’ in the
table below. The returns must be submitted to Lloyd’s by 2pm, 5 November 2015 .
1.5.4
The specific forms to be submitted for the interim reporting are listed below:
Form Description
ASR Reference
QSR Reference
Balance sheet
ASR002
QSR002
Own funds
ASR220
QSR220
Non-life technical provisions by line of business – Part A
ASR240
QSR240
Non-life technical provisions by line of business – Part B
ASR241
N/A
Non-life gross best estimate by country
ASR242
N/A
Assets and liabilities by currency
ASR260
N/A
Life technical provisions
ASR280
QSR280
Life gross best estimate by country
ASR281
N/A
Health SLT technical provisions
ASR283
QSR283
Health SLT gross best estimate by country
ASR284
N/A
Minimum capital requirement – Non-life
ASR510
QSR510
Minimum capital requirement – Life
ASR511
QSR511
Solvency Capital Requirement – for syndicates on full internal
models
ASR522
N/A
Form Description
AAD Reference
QAD Reference
Investment data – portfolio list
AAD230
QAD230
Derivatives data – open positions
AAD233
QAD233
Investment funds (look-through approach)
AAD236
QAD236
1.5.5
This document provides instructions to managing agents in respect of completion of the above
returns which have been developed in the CMR. The forms specifications have also been uploaded
onto the respective sections of the CMR.
5
1.6
Qualitative requirements
1.6.1
Managing agents will be required to be submit a qualitative report as at 31 December 2014 and the
deadline for submission is the same as that of quantitative reporting above. This should be as per
section 5 of the instructions.
1.7
Confidentiality of information
1.7.1
The information provided by managing agents to comply with these interim reporting requirements
shall remain confidential to Lloyd’s and the PRA; no information shall be made public by Lloyd’s.
6
Section 2: General instructions
The following instructions are common to the all of the interim Pillar 3 returns.
2.1
Pillar 3 returns
2.1.1
The Pillar 3 returns required to be submitted by syndicates as at 31 December 2014 and 30
September 2015 are based on Solvency II preparatory templates issued by EIOPA in July 2014 as
part of the XBRL taxonomy package, but tailored where necessary to cover areas of relevance to
Lloyd’s syndicates.
2.1.2
The asset data should be reported in the AAD with all the rest of the Solvency II information reported
in the ASR.
2.1.3
The ASR is a synchronous return, similar to the QMA, while AAD is an asynchronous return due to
the high volume of data required.
Synchronous
This has been the standard approach used for returns with relatively low volume of data, for
example, QMA. Below are some of the features:
 data can be input to CMR either through the user interface or in csv format
 data submitted in csv format can be edited via the user interface
 validations are done as and when the data is input
 all data can be printed
Asynchronous
This approach has been used for returns with high volume of data, for example, PMD/GQD/TPD
returns. Below are some of the features:

data is input to CMR as a series of zipped csv files

edits to the data are made by updating the csv and re-uploading it

validations are done when the data is uploaded

prior to submission, a validation tool is provided to pre-process the data for format compliance

summary data can be printed
2.1.4
A managing agent’s report (ASR910 and AAD910) must be also be completed for each of the ASR
and AAD respectively. The relevant formats are provided as Appendix 3 to these instructions.
2.1.5
No audit is required.
7
2.2
Reporting timetable
2.2.1
Timetable: The following table provides the deadlines for Pillar 3 submissions. The electronic version
of the completed return is required to be submitted by the managing agent to the Core Market
Returns site by 2pm of the relevant submission date.
Quarter
Submission date
Audited?
Type of submission
Q4 2014
Thursday 16 April 2015
No
Electronic only*
Q3 2015
Thursday 5 November 2015
No
Electronic only*
(*NB: Hard copies of the Pillar 3 returns are not required, however, hard copies of the signed
managing agent’s reports (ASR910 and AAD910) are required to be submitted to Lloyd’s by the
designated deadline).
The managing agent’s reports should be sent to:
Paul Appleton
Market Finance
Gallery 5
Lloyd’s 1986 Building
One Lime Street
London EC3M 7HA
There is no reception area on Gallery 5 so hard copies that are to be delivered by hand must be
taken to the “tenants and courier” office which is located on the lower ground floor on the left hand
side of the Lloyd’s building when viewed from Lime Street.
2.2.2
Late submissions: Failure to submit the returns by the due deadline will be considered a breach of the
Solvency and Reporting Byelaw (No.5 of 2007), as amended. A resubmission of the returns after the
deadline date will be considered a late submission.
Where a managing agent has reason to believe that it may be unable to submit the return on time it
is encouraged to contact Lloyd’s Market Finance at the earliest opportunity in advance of the
deadline to discuss the matter. Failure to do so will be a factor Lloyd’s will take into account in
deciding whether a fine is appropriate.
If an inaccurate or incomplete submission has been submitted then Lloyd’s may at its discretion
regard that submission as being “late” in which case a fine may be imposed. In deciding whether to
exercise that discretion Lloyd’s Market Supervision and Review Committee (MSARC) will have
8
regard to whether the managing agent itself identified the inaccuracy and brought the matter to
Lloyd’s attention at the earliest opportunity.
Where Lloyd’s is satisfied that a fine is appropriate then the following fining regime will be applied:
Per return per syndicate – flat fine
£5,000
Per return per syndicate – additional fine per working day late
£1,000
Persistent delays will lead to further disciplinary action.
Please note that in accordance with the above policy Lloyd’s will take disciplinary action against
managing agents who fail to submit market returns on time and fines will be imposed in appropriate
circumstances, a policy supported by MSARC.
2.3
Key contacts
2.3.1
Any queries about the completion of the Pillar 3 returns should be directed by e-mail to Market
Finance at [email protected]. All queries will be responded to by the end of the
following working day. Please contact Paul Appleton ([email protected]) via email if a
response remains outstanding at that time.
2.3.2
Please include the relevant form number(s) and a reference to the issue raised in the email header.
2.3.3
The key contacts within the Corporation of Lloyd’s in relation to the Pillar 3 returns are:
Paul Appleton
Senior Manager, Accounting Policy
George Maina
Project Manager, Accounting Policy
Jane Tusar
Project Executive, Accounting Policy
2.4
Overview of return
2.4.1
Parallel corporate syndicates must complete and submit separate Pillar 3 returns.
2.4.2
The return must be completed in respect of all open years of account and all run-off years of
account, in order to reflect the total insurance business transacted by underwriting members of
Lloyd’s.
2.4.3
When setting up a return, the system will generate the forms to be completed, and establish the
validation rules to be adhered to, as appropriate to that syndicate’s circumstances.
2.5
Basis of preparation
2.5.1
The returns must be prepared in accordance with these instructions. Where additional clarification is
required this will be issued via Frequently Asked Questions posted on the CMR website. This will
clearly set out whether the update is a change to the instructions or for guidance purposes only.
2.5.2
The return must be prepared in accordance with the Solvency II Directive, Level 2 Implementing
Measures and Level 3 Technical Guidance as issued by EIOPA, except where an alternative
treatment is specifically required in the instructions.
2.5.3
The instructions in respect of each form state the level at which the forms should be completed.
Each form must be completed at one of the following levels:
9

Whole syndicate (all reporting years combined)

Reporting year

Pure/Underwriting year
2.5.4
Whole syndicate or all reporting years combined means all of the transactions or assets and
liabilities as appropriate for the syndicate as a whole.
2.5.5
Reporting year means the calendar year that is being reported, for example, when reporting for the
year end 2014, the reporting year will be 2014.
2.5.6
Pure/Underwriting year relates to the year in which the business was originally written and to which
the original premiums and all subsequent transactions are signed. The pure original year may still be
open, or subsequently reinsured to close into another year of account. For general (non-life)
business the pure original year may be from the 1993 to the 2014 year of account, all liabilities in
respect of 1992 and prior years having been reinsured into Equitas effective at 31 December 1995.
When reporting on the transactions for a pure original year, only the transactions relating specifically
to that pure year must be reported.
2.6
Exchange rates
2.6.1
All figures are to be provided in GBP. A market bulletin will be issued on the next working day
following each quarter end providing suggested, but not mandatory, average and closing rates.
2.6.2
For the profit and loss account, all conversions will normally be made using exchange rates at the
dates of the transactions (or at average rate for the period when this is a reasonable approximation)
as defined under IAS 21, The Effects of Changes in Foreign Exchange Rates. Lloyd’s will not
prescribe the actual rates to be used.
2.6.3
For the balance sheet, conversions must be made using closing rates of exchange in accordance
with IFRS. Non-monetary items (if any) should be treated in the ASR as per IAS 21. IAS 21 requires
the following at the end of each reporting period:

Foreign currency monetary items should be translated using the closing rate

Non-monetary items that are measured in terms of historical cost in a foreign currency should be
translated using the exchange rate at the date of the transaction

Non-monetary items that are measured at fair value in a foreign currency should be translated
using the exchange rates at the date when the fair value was measured
2.6.4
Solvency II requires that all assets and liabilities should be measured at fair value, hence all foreign
currency assets and liabilities should be translated at closing rate.
2.7
Reporting configuration
2.7.1
All forms are to be completed in currency units, not 000's, unless specified on the form. Generally, all
values must be entered as positive numbers unless otherwise stipulated on the forms and
instructions
2.8
Completion of forms
2.8.1
All amounts on each form must be completed as indicated on the form. Additional guidance is
provided in respect of each form in these instructions.
2.8.2
Certain figures disclosed on some forms in the return must agree or relate to figures on other forms.
10
2.8.3
The Pillar 3 returns must be prepared on the same underlying data as used in the preparation of the
QMA. In other words, no adjustment is made in respect of post balance sheet events in the returns
unless such an adjustment has already been made in accordance with UK GAAP for the purpose of
the QMA (and thus the syndicate accounts). Furthermore, any adjustments made to technical
provisions for Solvency II purposes shall be based on the underlying technical provisions as reported
in the QMA.
2.9
‘Analysis’ cells
2.9.1
Certain cells require analysis of material amounts to be provided in the analysis section (i.e. a
description and details of the material amount must be disclosed). For such items, the system will
generate a sequentially numbered continuation sheet. Where we have identified common reasons for
an ‘other’ entry, use the suggested description in the analysis section where appropriate.
2.9.2
Any amount greater than £1m must be given a description that is sufficient for the reader to
understand its nature. General terms such as “other,” “miscellaneous,” etc. should not be used for
amounts greater than £1m. Descriptions given to amounts below £1m will be at the discretion of the
agent and auditor given the circumstances of the syndicate and the nature of the analysis figure.
2.10
Equitas
2.10.1 The Pillar 3 returns must be prepared on a basis of recognising the reinsurance to close of all 1992
and prior non-life business into Equitas, effective as at 31 December 1995. In particular, only
transactions, assets and liabilities relating to 1993 and post non-life business (and ALL life business)
must be reported in the return. Any transactions occurring in the current year relating to 1992 and
prior non-life business must NOT be reported in this return.
2.11
Quarterly Monitoring Return part C (QMC)
2.11.1 Syndicates are currently required to submit a QMC and this is used for capital setting/release tests at
Lloyd’s. This return will still be required to be submitted and specific instructions for completion
can be found on the CMR website.
2.12
Scope of these instructions
2.12.1 The instructions below are specifically for completion of the ASR and AAD returns which are
required for the year ending 31 December 2014. Instructions for the Q3 2015 interim reporting will
be issued in Q2 2015.
11
Section 3: form instructions for ANNUAL SOLVENCY RETURN
3.1
ASR 010: Control page
syndicate number, managing agent, reporting years of account and their status (open/closed/run-off) and
pure years comprising each reporting year.
The software will generate the forms required to be completed in accordance with the data in the matrix. It is
important that you check that the matrix is populated correctly.
We do recognise, however, that the persons signing off the return may not necessarily be those to whom
queries should be sent to. If this is the case, please email Market Finance via [email protected], with details of an alternative contact, who shall be included on the queries
distribution list relating to the syndicate.
3.2
ASR 026: Additional Material Currency Selection
Purposeofform: This form allows syndicates to select additional material currencies required on ASR260.
This form allows syndicates to select additional currencies required in ASR260 i.e. other than the 6
currencies (USD, GBP, EUR, CAD, AUD and JPY) already presented in ASR260. Syndicates are required to
report separately any additional currencies that represent 20% or more of both assets and liabilities.
3.3
ASR 002: Overall Balance Sheet
Purposeofform: This form presents an overall view of the balance sheet of the syndicate under Solvency II
valuation rules, compared with UK GAAP.
The amounts in Column A will be valued based on Solvency II valuation principles while those in Column B
will be on a UK GAAP basis. The Solvency II amounts reported in column A are expected to be positive but
there are cases where these amounts can be negative and this is mainly in respect of technical provisions
best estimate i.e. where the cash in-flows is greater than cash out-flows. Please see Appendix 2 for the
mapping of Solvency II balance sheet to QMA002, but this is only a guide and syndicate should ensure that
amounts are reported within the correct balance sheet lines.
The UK GAAP amounts as reported in column B are expected to be positive and must agree to the
disclosure in the syndicate annual accounts and QMA002, Column C or, where fewer lines/different names
are used in the accounts/QMA, it should be possible to agree the figures in total.
Assets
Solvency II amounts reported in the balance sheet should be valued at fair value, for example, investments
should be valued using one of the following valuation methods:

Quoted market price in active markets for the same assets
12

Quoted market price in active markets for similar assets

Other alternative valuation methods
The amounts reported in this form, for those assets that are required to be reported in the AAD230/233,
should agree with the total Solvency II amount. To assist in the reconciliation between this form and the
AAD230/233, a play back summary has been developed and is based on the lines on the balance sheet.
Hence syndicate should ensure that the amount reported in this form agrees with the amount presented in
the AAD230s (play back summary).
Line A1 - Goodwill: This is valued nil under Solvency II
Line A2 – Deferred acquisition costs: There are no deferred acquisition costs under Solvency II as all
acquisition costs not received by the reporting date are included in the calculation of technical provisions.
Hence, no amount is expected within A2.
Line A3 – Intangible assets: These are intangible assets other than goodwill. They should be valued at nil
under Solvency II valuation principles, unless they can be sold separately and the syndicate can demonstrate
that there is a market value for the same or similar assets that has been derived in accordance with Level 2
implementing measures.
Line A4 – Deferred tax assets: This is an asset that may be used to reduce any subsequent period's income
tax expense. Deferred tax assets can arise due to net loss carry-overs, which are only recorded as assets if it
is deemed more likely than not that the asset will be used in future fiscal periods (i.e. where it is probable that
future taxable profit will be available against which the deferred tax asset can be utilised). We do not expect
syndicates to report any amount within this line since tax would apply at member level.
Line A5 – Pension benefit surplus: This is net surplus related to staff pension scheme, if applicable. We
would not expect syndicates to report any amount within this line.
Line A6 – Property, plant & equipment held for own use: These are tangible assets which are intended for
permanent use and property held by the undertaking for own use, but Lloyd’s would not expect any amount to
be reported within this line. The amount reported within this line should agree with the total Solvency II
amount reported in AAD230 with a CIC of XT93 and XT95.
Line A7 - Property (other than for own use): This is investment property and Lloyd’s is not expecting any
amount to be reported within this line. Where a syndicate has investment in funds investing in real estates,
this should be reported within line A21, real estate funds. The amount reported within this line should agree
with the total Solvency II amount reported in AAD230 with a CIC of XT91, XT92, XT94 and XT99.
Line A8 – Participations: This is defined in article 13(20) of the Solvency II Directive as “ownership, direct or
by way of control, of 20% or more of the voting rights or capital of an undertaking”. Lloyd’s does not expect
syndicates to have any participations, hence no amount is expected within this line.
Line A9 – Equities-listed: These are shares representing corporations’ capital, e.g. representing ownership in
a corporation, listed on a public stock exchange. The amount reported within this line should exclude
participations and should agree with the total Solvency II amount reported in AAD230 with a CIC category 3#,
excluding XL3#, XT3#.
Line A10 – Equities –unlisted: These are shares representing corporations’ capital, e.g. representing
ownership in a corporation, not listed on a public stock exchange. The amount reported within this line should
exclude participations and should agree with the total Solvency II amount reported in AAD230 with CIC
categories of XL3# and XT3#.
Line A12 – Government Bonds: These are bonds issued by public authorities, whether by central
13
government, supra-national government institutions, regional governments or municipal governments. The
amount reported within this line should agree with the total Solvency II amount ( market value plus accrued
Line A13 – Corporate Bonds: These are bonds issued by corporations including those issued by government
agencies, for example, Federal National Mortgage Association (Fannie Mae) and Federal Home Loan
Mortgage Corporation (Freddie Mac). The amount reported within this line should agree with the total
Solvency II amount (market value plus accrued interest) reported in AAD230 with a CIC category of ##2#.
Line A14 – Structured notes: These are hybrid securities, combining a fixed income instrument with a series
of derivative components. Excluded from this category are fixed income securities that have been issued by
sovereign governments. These are all securities that have embedded all categories of derivatives, including
Credit Default Swaps (CDS), Constant Maturity Swaps (CMS) and Credit Default Options (CDO). The
amount reported within this line should agree with the total Solvency II amount (market value plus accrued
Line A15 – Collateralised securities: These are securities whose value and payments are derived from a
portfolio of underlying assets. These include Asset Backed securities (ABS), Mortgage Backed securities
(MBS), Commercial Mortgage Backed securities (CMBS), Collateralised Debt Obligations (CDO),
Collateralised Loan Obligations (CLO) and Collateralised Mortgage Obligations (CMO). The amount reported
within this line should agree with the total Solvency II amount (market value plus accrued interest) reported in
AAD230 with a CIC category of ##6#.
Lines A17 - A25 – Investment funds: These should include all the funds (including money market funds) that
are held by the syndicate. Overseas trust funds that are managed by Lloyd’s should also be reported as
investment funds and the type of fund should be based on the CIC reported in AAD230. For example, where
the CIC is reported as 42, then this should be reported in the balance sheet within debt funds. The amounts
reported within these lines should agree with the total Solvency II amount reported in AAD230 as follows:

Equity funds – CIC ##41

Debt funds – CIC ##42

Money market funds – CIC ##43

Asset allocation funds – CIC ##44

Real estate funds – CIC ##45

Alternative funds – CIC ##46

Private equity funds – CIC ##47

Infrastructure funds – CIC ##48

Other – CIC ##49
Line A27 – Derivatives: Only derivative assets should be included on this line i.e. those with positive values.
These should be derivative assets that are directly held by the syndicate and hence do not include those that
are held indirectly through investments funds or structured notes. The amount reported within this line should
agree with the total Solvency II amount reported in AAD233 with a CIC of A to F (where the value is positive).
Line A28 - Deposits other than cash and cash equivalents: These are deposits other than transferable
deposits. These means that they cannot be used to make payments at any time and that they are not
exchangeable for currency or transferable deposits without any kind of significant restriction or penalty. The
amount reported within this line should agree with the total Solvency II amount reported in AAD230 with CIC
14
XT73, XT74 and XT79.
Line A29 – Other investments: This cell is an analysis cell. All material amounts included in this cell must be
separately listed in the analysis table (see section 2.9 ‘analysis cell’ above for details of materiality).
Line A31 – Assets held for unit-linked & index-linked funds: These are assets held for insurance products
where policyholder bears the risk (unit-linked). Lloyd’s would not expect any amount reported within this line.
Line 32 – Loans & mortgages to individuals: These are financial assets created when creditors lend funds to
debtors - individuals, with collateral or not, including cash pools.
Line 33 – Other loans & mortgages: These are financial assets created when creditors lend funds to debtors
- others, not classifiable as loans & mortgages to individuals, with collateral or not, including cash pools.
The amount reported within lines 33 and 34 should agree with the total Solvency II amount reported in
AAD230 with CIC of XT81, XT82, XT84, XT85 and XT89.
Line A34 – Loans on policies: These are loans to policyholders collateralised on policies. We do not expect
syndicates to have this type of asset. The amount reported within this line should agree with total amount
reported in AAD230 with a CIC of XT86.
Lines 36 & 37 – Reinsurance recoverables (Non-life excluding health and health similar to non-life):
Reinsurers’ share of technical provisions relating to non-life and health similar to non-life should be reported
within the appropriate lines. The total amount of these two lines should agree to the recoverable from RI/SPV
after adjustment for expected losses due to default reported in ASR240, Q29.
Line 39 - Reinsurance recoverables (Health similar to life): Reinsurers’ share of technical provisions relating
to health similar to life should be reported within this line. This amount should agree to the recoverable from
RI/SPV after adjustment for expected losses due to default reported in ASR283, F7.
Line 40 - Reinsurance recoverables (Life): Reinsurers’ share of technical provisions relating to life should be
reported within this line. This amount should agree to the recoverable from RI/SPV after adjustment for
expected losses due to default reported in ASR280, I7.
Line 42 – Life index-linked and unit-linked: Reinsurers’ share of technical provisions relating to life indexlinked and unit-linked should be reported within this line. Syndicates do not write this type of business hence
no amount is expect to be reported within this line.
Line 44 – Deposits to cedants: These are deposits relating to reinsurance accepted and should agree with
the amount reported in AAD230 with a CIC of XT75.
Line 45 – Insurance & intermediaries receivables: These are amounts due by policyholders, intermediaries,
other insurers, and linked to insurance business, but that are not included in cash-in flows of technical
provisions. Includes also amounts overdue by policyholders and insurance intermediaries (e.g. premiums due
but not yet received).
Line 46 – Reinsurance receivables: These are amounts due by reinsurers and linked to reinsurance
business, but that are not reinsurance recoverables (RI share of technical provisions). It may include;
creditors from reinsurers that relate to settled claims of policyholders or beneficiaries and payments in
relation to other than insurance events or settled insurance claims.
Line 47 – Receivables (trade, not insurance): Includes amounts owed by employees or various business
partners (not insurance-related), incl. public entities (no reason to have separate lines for current tax assets).
Line 48 – Own shares: These are own shares held by the undertakings. Syndicates do not have shares,
hence no amount is expected within this line.
15
Line 49 – These are amounts due in respect of own fund items or initial fund called up but not yet paid in:
This would mainly relate to Funds in Syndicate (FIS) that has been called up but had not been paid by year
end. We do not expect syndicates to have any unpaid FIS, hence no amount is expected within this line.
Line A50 – Cash and cash equivalents: These are notes and coins in circulation that are commonly used to
make payments, and deposits exchangeable for currency on demand at par and which are directly usable for
making payments by cheque, draft, giro order, direct debit/credit, or other direct payment facility, without
penalty or restriction. These are amounts classified with CIC codes, XT71 and XT72.
Line A51 – Any other assets, not elsewhere shown: This cell is an analysis cell. All material amounts
included in this cell must be separately listed in the analysis table (see section 2.9 ‘analysis cell’ above for
details of materiality).
Liabilities
Technical provisions
These should be valued in accordance with Lloyd’s Solvency II guidance titled “Technical Provisions under
Solvency II Detailed Guidance (March 2011 update)”. These instructions can be accessed through the
following link: Link to Technical Provisions Guidance.
There have previously been some areas of uncertainty relating to the calculation of technical provisions on a
Solvency II basis and the key ones included: binary events, contract boundaries for binding authorities and
allowance for reinsurance on future business. Lloyd’s has received clarification on two of these, binary events
and contracts boundaries for binding authorities, more details are given below. Uncertainty remains as to the
treatment of outwards reinsurance on future business, Lloyd’s is seeking further clarification on this. For
each of the three areas above Lloyd’s anticipates updating its Technical Provisions Guidance in early 2015.
Binary events
It’s requirement to take account of all possible future outcomes when calculating Solvency II basis technical
provisions. The difference in basis between the UK GAAP ‘reasonably foreseeable’ and Solvency II ‘all
outcomes’ is commonly referred to as allowance for events not in data (ENID) or binary events. Managing
agents are expected to justify their approach in respect of their own data as well as nature and uncertainty
inherent in their business.
Contract boundaries for binding authority contracts
EIOPA’s Guidelines on Contract Boundaries (para 2.16) notes: “A need to reassess the contract boundaries
can arise, where a delegated underwriting authority or binder exists which can sign business on behalf of the
undertaking. The undertaking requires information on the underlying insurance contracts written within the
binder to assess the contracts which fall within the contract boundary at a given valuation date. If this
information is not available, estimates will need to be made.”
Therefore, syndicates will need to carry out a look-through process to identify the underlying contracts that
are written (including bound but not incepted) within the reporting period. Reasonable approximations for the
look-through approach can be made. Estimates of contracts entered into can be based on historical
experience of specific binders and/or the terms and conditions of the binder to assess the number of
contracts likely to be entered into and likely corresponding cash-flows. Where the syndicate has not received
information of the contracts entered into, an estimate will need to be made.
The treatment of the binding authority as the ‘contract’ in this regard is not appropriate (e.g. through the use
of cancellation periods of the binder). As binding authorities are not contracts of (re)insurance a look-through
to the underlying contracts (or reasonable approximation) is required.
16
Risk margin
Calculation of the risk margin as at 31 December should be based on the final SCR submitted to Lloyd’s in
September via the Lloyd’s Capital Return (LCR), plus any capital add-on notified by Lloyd’s by 31 December.
However, if a revised SCR has been produced then this should be used. The SCR to be used for the
calculation of the risk margin is the ‘one year’ SCR, not the SCR to ultimate and should be based on current
obligations on the balance sheet only (i.e. not allow for business to be written in future not included on the
Solvency II balance sheet).
In discounting technical provisions as at 31 December, managing agents should use the risk free yield curves
published by Lloyd’s in early January. However, where EIOPA has issued the risk free yield curves, these
should be used. Where Lloyd’s’/EIOPA publishes the risk free yield curves, a link will be provided on the
Lloyd’s website.
The ‘Solvency II value of the technical provisions’ should be reported in the respective line, i.e. risk margin
and best estimate while the UK GAAP statutory accounts value should be reported on the “Technical
Provisions calculated as a whole” line.
Technical Provisions calculated as a whole: Separate calculation of the best estimate and risk margin are
not required where the future cash-flows associated with insurance obligations can be replicated using
financial instruments for which a market value is directly observable. The portfolio must be
replicable/hedgeable. Lloyd’s does not expect syndicates to calculate technical provisions as a whole,
however, where a syndicate has transferred its liabilities to another syndicate through RITC and the technical
provisions transferred cannot be split into best estimate and risk margin, the price payable can be considered
to be the market price of the technical provisions and hence should be reported within “technical provisions
calculated as a whole”.
The amounts reported within the technical provisions lines (53 to 68) should agree with the amounts reported
in the non-life, life and health technical provisions forms (ASR240, 280 and 283 respectively) as shown in the
table below:
ASR002 Reference
ASR240/280/283 Reference
ASR240, Q1
ASR240, Q25
ASR240, Q27
Line 61
ASR283, F1
Line 62
ASR283, F2
Line 63
ASR283, F9
Line 65
ASR280, I1
Line 66
ASR280, I2
Line 67
ASR280, I9
17
Lines 69-72 – Technical provisions – index linked and unit linked: Syndicates do not write this type of
business, hence no amount is expected to be reported within these lines.
Line 73 – Other technical provisions: These are other technical provisions arising from UK GAAP. This line
should be nil for Solvency II column.
Line 74 – Contingent liabilities: These are liabilities that are contingent, therefore off-balance sheet according
to IAS 37, Provisions, Contingent Liabilities and Contingent Assets. The standard defines a contingent liability
as:
(a) A possible obligation that arises from past events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the
entity; or
(b) A present obligation that arises from past events but is not recognised because:
(i) it is not probable that an outflow of resources embodying economic benefits will be required to settle
the obligation; or
(ii) the amount of the obligation cannot be measured with sufficient reliability.
These are neither related to insurance, nor financing nor lease; they are, for example, related to legal
expenses (with an expected probability of less than 50%).
Line 75 – Provisions other than technical provisions: These are liabilities of uncertain timing or amount, for
example, provisions for legal expenses or deferred income reserve.
Line 76 – Pension benefit obligations: These are net obligations related to staff pension scheme, if applicable
according to pension system.
Line 77 – Deposits from reinsurers: These are amounts received from reinsurer or deducted by the reinsurer
according to the reinsurance contract.
Line 78 – Deferred tax liabilities: A tax liability that a company owes and does not pay at that current point,
although it will be responsible for paying it at some point in the future. These are tax liabilities that are a result
of temporary differences between the accounting and tax carrying values, the anticipated and enacted
income tax rate, and estimated taxes payable for the current year. In simple terms, it is tax that is payable in
future. We do not expect syndicates to report any amount within this line since tax would apply at member
level.
Line 79 – Derivatives: Only derivative assets should be included on this line i.e. those with negative values.
These should be derivative liabilities that are directly held by the syndicate and hence do not include those
that are held indirectly through investments funds or structured notes. The amount reported within this line
should agree with the total Solvency II amount reported in AAD233 with a CIC of A to F (where the value is
negative).
Line 80 - Debts owed to credit institutions: These are debts, such as mortgage and loans that are owed to
credit institutions, for example, banks. This excludes bonds being held by credit institutions, since it is not
possible for the undertaking to identify all the holders of the bonds it issues. Subordinated liabilities should
not be included here.
Line 81 – Financial liabilities other than debts owed to credit institutions: This includes bonds issued by the
undertaking (whether they are held by credit institutions or not), and mortgage and loans due to other entities
than credit institutions. This includes structured notes issued by the undertaking itself (not by SPV).
Subordinated liabilities should not be included here.
18
Line 82 – Insurance & intermediaries payable: These are amounts due to policy holders, other insurers, and
linked to insurance business. This would relate to amounts that not been transferred to technical provisions
i.e. over-due amounts. This includes amounts due to (re)insurance intermediaries (e.g. commissions due to
intermediaries but not yet paid by the syndicate).
These excludes loans & mortgages due to insurance companies, if they are not linked to insurance business
but are only related to financing (and are therefore included in financial liabilities).
Line 83 – Reinsurance payables: These are amounts due to reinsurers other than deposits and linked to
reinsurance business, but that are not included in reinsurance recoverables i.e not transferred to RI share of
technical provisions. These includes debtors to reinsurers that relate to settled claims of policy holders or
beneficiaries.
Line 84 – Payables (trade, not insurance): This includes amounts due to employees, suppliers, etc. and not
insurance-related, similar to receivables (trade, not insurance) on asset side; includes public entities.
Line 85 – Subordinated liabilities not in BOF: These are debts which rank after other debts when company is
liquidated, only subordinated liabilities that are not classified in basic own funds (BOF) should be presented
here. We do not expect syndicates to report any amounts within this line.
Line 86 – Subordinated liabilities in BOF: These are debts which rank after other debts when company is
liquidated, only subordinated liabilities that are classified in BOF should be presented here. We do not expect
syndicates to report any amounts within this line.
Line 87 – Any other liabilities, not elsewhere shown: This includes any liabilities not included in the other
balance sheet items.
Other areas
Future cash flows transferred from (re)insurance receivables/payables to technical provisions
Solvency II requires transfer of future cash flows from (re)insurance receivables/payables to technical
provisions. Amounts included in (re)insurance receivables/payables that are not “over-due” should be
transferred to technical provisions as future cash flows. Agents should ensure that adjustments made to
(re)insurance receivables/payables in relation to future cash flows agree to respective amounts included in
the calculation of the technical provisions and reported in the technical provision data return (TPD). We
would not expect any adjustments against reinsurance receivables in respect of recoverable on paid claims
as these amounts should be left as debtors in the balance sheet.
LCA balances
LCA balances are future cash flows and hence should be included in the Technical Provisions. However, any
amount included in the LCA balances where the contractual settlement due date has passed by the period
end date but which at the period end date have not been received should be reported as debtors in ASR002.
From a premium stand point the agent needs to consider what has been received. If the agent is notified of a
premium signing which has not yet been settled and has a due date after the balance sheet date then this is
a future cash flow and should be reported in technical provisions. This remains as a future cash flow in
technical provisions until the cash is received by the syndicate.
From a claims standpoint, the managing agent will know when a claim has been paid and can deem the cash
flow as having occurred. If it is reported in LCA balances once paid at the balance sheet date then it should
be left in creditors on the balance sheet i.e. should not be considered a future cash flow in technical
provisions.
19
In summary, managing agents need to consider the cash flow between the syndicate and LCA and decide if it
is a future cash flow from the syndicate's perspective.
Reinsurance recoveries
The key defining characteristic is when the reinsurance recoveries in question are booked as "paid" (i.e. the
moment they would appear in the QMA/financial statements as "debtors arising out of reinsurance
operations/reinsurance receivables” in the balance sheet and “reinsurers’ share of paid claims" in the P&L
account). If, for any reason, the processing of reinsurance recoveries results in a mis-match to the gross
payment (e.g. there is a delay in calculating and processing outwards amounts to "paid") then the
unprocessed expected reinsurance recoveries would remain as outstanding (unsettled) reinsurance claims
for a period of time. As with the current treatment, these recoveries would remain within technical provisions
for Solvency II until this is processed as paid (and collection notices issued). For most agents, this would be
the same as the current financial reporting/accounting basis. For the avoidance of doubt, any uncollected
reinsurance recoveries in respect of reinsurance items booked as "paid" are not reported as technical
provisions but as debtors. Hence, on ASR002, we would not expect any adjustments (relating to claims paid)
within line 46 ‘Reinsurance receivables’ to technical provisions. The same principles would apply to any
associated reinstatement or outwards adjustment premiums.
This is consistent with the principle of correspondence in that technical provisions only include the expected
reinsurance cash flows that relate to the expected (unsettled) gross claims on current obligations but
recognising that, in practice, some reinsurance recoveries will see a lag between the gross and reinsurance
claims being calculated and/or processed.
Other assets and other liabilities
These should be valued at fair value by discounting expected cash flows using a risk free rate. However,
book value as per UK GAAP may be used as a proxy to the fair value for Solvency II balance sheet purposes
where the impact of discounting is not material because the balances are due/payable within one year or
amounts due/payable in more than one year are not material. Materiality should be determined in accordance
with International Accounting Standards (IAS1) i.e. “Omissions or misstatements of items are material if they
could, individually or collectively, influence the economic decisions that users make on the basis of the
financial information. Materiality depends on the size and nature of the omission or misstatement judged in
the surrounding circumstances.”
Profit commission
Where the profit under Solvency II would be different to that under UK GAAP, agents should recalculate the
profit commission to reflect the change in the profit. Hence, the profit commission recognised in the Solvency
II column should be based on the Solvency II profit.
However, where the syndicate year is closing, there is no recalculation of the profit commission in respect of
the closing year as distribution will be based on the QMA (UK GAAP result). However, the effect of Solvency
II valuation differences on the liabilities accepted by the reinsuring year of account, either for the same or
another syndicate, should be taken into account when calculating the notional Solvency II profit commission
for the reinsuring syndicate year.
Funds in syndicate (FIS)
Where a syndicate holds FIS, this should be reported within the respective investments lines i.e. ASR002,
lines 7-29. The amount reported within these lines should agree with the respective total Solvency II amounts
reported in the AAD230.
20
3.4
ASR220: Own Funds
Purposeofform: This form provides a detailed overview of the syndicate’s own funds.
The syndicate should report funds in syndicate (FIS) in this form but funds at Lloyd’s (FAL) should be
excluded. All items of own funds should be reported in Tier 1. If the managing agent considers that this is not
appropriate, it should contact Lloyd’s,
Line 1 – Members’ contributions: This is the amount of capital contributed by and held by syndicates. Only
FIS should be reported on this line. FIS is Tier 1 (unrestricted), hence we would expect that only B1 is
completed.
Line 2 – Reconciliation reserve: The reconciliation reserve represents reserves (e.g. retained earnings), net
of adjustments (e.g. foreseeable distributions). It also reconciles differences between the accounting
valuation and Solvency II valuation. In the case of syndicates, the value on this line will equal members’
balances, less foreseeable distributions and FIS (if applicable).
Line 3 – Other items approved by supervisory authority as basic own funds not specified above: This is the
total of any items of basic own funds not identified above. We don’t expect syndicates to have any amount
reported within this line.
Line 5 – Total available own funds to meet the SCR: This is the total own funds of the syndicate, comprising
basic own funds after adjustments plus ancillary own funds, that are available to meet the SCR. In the case
of syndicates, this is the total amount of basic own funds.
Line 6 – Total available own funds to meet the MCR: This is the total own funds of the syndicate, comprising
basic own funds, that are available to meet the MCR.
Line 7 – Total eligible own funds to meet the SCR: At least 50% of the SCR should be covered by Tier 1 own
funds and a maximum of 15% may be covered by Tier 3. Also, restricted Tier 1 eligible funds to cover SCR
cannot be more than 20% of the total Tier 1 funds used to cover SCR. The balance of the restricted Tier 1
funds may be included as Tier 2 funds. Lloyd’s expect that all syndicates’ own funds would fall under
unrestricted Tier 1 funds.
Line 8 – Total eligible own funds to meet the MCR: At least 80% of the MCR should be covered by Tier 1
eligible own funds with the balance being covered by Tier 2 basic own funds.
Line 9 – Solvency Capital Requirement (SCR): This is the total SCR of the syndicate and should correspond
to SCR amount reported in ASR522, line 10.
Line 10 – Minimum Capital Requirement (MCR): This is the MCR of the syndicate and should correspond to
the total MCR disclosed in ASR510, A24 or ASR511, A13 for non-life and life syndicates respectively.
Line 13 – Excess of assets over liabilities: This amount should agree to the excess of assets over liabilities
amount reported in ASR002, A89.
Line 14 – Foreseeable distributions: This is the amount of distribution that has been approved by the
managing agent’s Board but has not been made by the reporting date. Hence at the end of Q4, profit from
the closing year should be reported within this line. For example, assuming that the reporting date is 31
December 2014 and the syndicate has 2012, 2013 and 2014 years of account, the expected distribution for
2012 should be reported within this line. The same treatment should be applied on the expected open year
profit release, i.e. on the 2013 and 2014 reporting years.
21
Open/run-off years
Open/run-off year profit release should be based on the lower of the syndicate UK GAAP solvency result as
per QMA005, line 7 and Solvency II net balance i.e. QMC002 column C line 55 to 64 for the relevant
reporting year of account. Where the UK GAAP solvency result has been improved by a positive adjustment
to reflect exchange differences on technical provisions for solvency in respect of non-monetary items
(QMA005 line 2) then this element of the result is not available for release.
The lower amount determined as per above should be reported within line 14, foreseeable distributions.
However, this should only be where the syndicate is planning to have an open/run-off year profit release i.e
has indicated “NO” on QMA101 and has provided a signed QMA923 for the respective open year(s).
Closed year
Closed year profit release should be based on the syndicate’s UK GAAP result as per QMA360, A5, but
adjusted for “three year funded adjustments” as per QMA102, D54. This amount should be reported within
line 14, foreseeable distributions.
Line 15 – Other basic own fund items: This is the sum of “members’ contributions (Funds in syndicate – FIS)
(line 1)” and “other items approved by supervisory authority as basic own funds not specified above (line 3)”.
Line 16 – Restricted own fund items due to ring fencing: We do not expect any amounts reported within this
line.
Line 18 & 19 – Expected profits included in future premium (EPIFP) – Life/non-life: These are the expected
profits included in future premiums and that are recognised in technical provisions. Only one line is expected
to be completed i.e. either line 18 or line 19 for life and non-life respectively. However, where a non-life
syndicate has annuities stemming from non-life insurance contracts, line 18 should also be completed with
EPIFP from these insurance contracts.
The following is the definition of EPIFP split between incepted and unincepted business:

For incepted business: take the future premium relating to incepted business (net of acquisition costs
and reinsurance), and subtract the anticipated net claims and expenses, related to this future premium
only. These anticipated net claims are not the same as the incepted net insurance losses since these net
insurance losses include anticipated losses in respect of premiums already received. Similarly for
expenses.

For un-incepted business: on the assumption that no premiums have been received for un-incepted
business, simply take the un-incepted premium (net of acquisition costs and reinsurance) within the
premium provisions, and subtract the un-incepted net claims and expenses within the premium
provisions.
All the amounts should be determined on a Solvency II basis.
Line 24 – Paid in - Members’ contributions (FIS) – Movement in the period: This is the amount of FIS that
has been paid in and should agree to the amount reported in the QMA202. The balance b/fwd amount should
be the same as the amount reported in the prior year’s QMA 202. The movement during the year as a result
of additional/released capital or valuation differences should be reported under increase or reduction column,
as appropriate.
Line 25 – Called up but not yet paid in - Members’ contributions (FIS) – Movement in the period: This is any
additional FIS that has been requested from members but has not been received by reporting date.
22
Line 27 – Difference in the valuation of assets: Solvency II requires that all assets are valued at fair value
while under GAAP some assets could be valued at cost or amortised cost. For example, under GAAP
receivables are valued at recoverable amount, but Solvency II requires that the expected recoverable amount
should be discounted. Hence this would lead to a difference in valuation. The amount reported within this line
is automatically calculated from the amounts reported in the balance sheet (ASR002).
Line 28 – Difference in the valuation of technical provisions: Valuation of technical provisions is different
under Solvency II compared to GAAP. Solvency II requires that technical provisions should be on a best
estimate. Also under Solvency II, technical provision is based on a legal obligation basis i.e. unincepted
contracts are included in the valuation of the best estimate. These are some of the differences, however for
further details on Solvency II technical provisions, refer to Lloyd’s Solvency II guidance titled “Technical
Provisions under Solvency II Detailed Guidance (March 2011 update)”. These instructions can be accessed
through the following link: Solvency II Technical Provisions Guidance. The amount reported within this line is
automatically calculated from the amounts reported in the balance sheet (ASR002).
Line 29 – Difference in the valuation of other liabilities: Similar to assets, liabilities should be valued at fair
value. Differences between valuation of other liabilities (excluding technical provisions) should be reported
within this line. The amount reported within this line is automatically calculated from the amounts reported in
the balance sheet (ASR002).
Line 30 – Total of reserves and retained earnings from financial statements: This is the members’ balances
as reported in the QMA002, C32 and financial statements. Where the members’ balances is a surplus
(balance due to members), this should be reported as a positive amount but if it is a deficit (balance due from
members), it should be reported as a negative amount. For syndicates with FIS, this amount should exclude
the FIS amount as this is reported within line 33.
Line 31 – Other: This is an analysis cell, hence all material amounts included in this cell must be separately
listed in the analysis table (see section 2.9 ‘analysis cells’ above for details of materiality). The syndicate
should report within this line any amount making up the excess of assets over liabilities that is not reported in
lines 27-30. Lloyd’s does not expect any amount to be reported within this line. Hence where an amount is
reported within this line, details of the amount should be provided on form 990.
Line 33 - Excess of assets over liabilities attributable to basic own fund items (excluding the reconciliation
reserve): This is basic own funds making up the excess of assets of liabilities other than retained earnings
and valuation differences. In the case of syndicates with FIS, this will be the value of FIS, otherwise it will be
nil for those syndicates with no FIS.
Line 34 - Excess of assets: This should agree with the excess of assets over liabilities reported in ASR002
(A89)
3.5
ASR240: Non-life Technical Provisions (By line of business – Part A)
Purposeofform: This form reports an overview of the non-life technical provisions by Solvency II line of
business and split into main components; best estimate (gross and net), reinsurance recoverable,
claims/premiums provisions and risk margin.
This form is required for all reporting years combined and the amounts should be discounted. Calculation of
the best estimate should be in accordance with Solvency II principles and as detailed in the Lloyd’s Solvency
II guidance titled “Technical Provisions under Solvency II Detailed Guidance (March 2011 update)”. These
instructions can be accessed through the following link: Solvency II Technical Provisions Guidance.
Technical provisions calculated as whole: This is the amount of technical provisions in the case of
replicable or hedgeable (re)insurance obligations, as defined in Article 77.4 of the Framework Directive. The
best estimate and risk margin are calculated together where future cash flows associated with the
23
(re)insurance obligations can be replicated reliably using financial instruments for which a reliable market
value is observable. In this case, the value of technical provisions should be determined on the basis of the
market value of those financial instruments. Lloyd’s does not expect syndicates to calculate technical
provisions as a whole, however, where a syndicate has transferred its liabilities to another syndicate through
RITC and the technical provisions transferred cannot be split into best estimate and risk margin, the price
payable can be considered to be the market price of the technical provisions and hence should be reported
within “technical provisions calculated as a whole”.
The valuation of the best estimate should be calculated separately in respect of premium provisions and
claims provisions.
Classification of business as direct business should be based on the insured i.e. insurance contracts issued
to policyholder either directly by the syndicate or through an intermediary should be classified as “direct”
business.
This form requires reporting of technical provisions by Solvency II lines of business. Agents also submit
similar information by risk codes, via the Technical Provisions Data return (TPD). To assist in the completion
of this form, there is already an existing mapping between risk codes and Solvency II lines of business that
was provided as part of the TPD reporting. This may be accessed via the following link:Risk code mapping to
SII class of business
The amounts reported in this form should agree to the amount reported in the balance sheet as follows:
(i)
Total technical provisions calculated as a whole (Q1) should be equal to ASR002 (A53+A57)
(ii)
Total gross best estimate (Q25) should be equal to ASR002 (A54+A58)
(iii)
Total Risk margin (Q27) should be equal to ASR002 (A55+A59)
(iv)
Total recoverable from RI (Q29) should be equal to ASR002, A38
3.6
ASR241: Non-life Technical Provisions (By line of business – Part B)
Purposeofform: This form reports an overview of the premium and claims provisions cash out-flows and inflows and details of the number of homogeneous risk groups, by Solvency II line of business.
Article 80 of the Solvency II Directive requires that, “(re)insurance undertakings shall segment their insurance
and reinsurance obligations into homogeneous risk groups and as a minimum by lines of business, when
calculating their technical provisions”. Hence, where syndicates have segmented their business in
homogeneous risks groups other than Solvency II lines of business, they are required to report on this form,
the number of homogeneous risk groups per Solvency II line of business.
The form also requires a split of cash flows used in the calculation of claims and premium provision. The
cash in-flows should include future premiums (gross of acquisition costs) and receivables for salvage and
subrogation while the cash out-flows should include claims, benefits and expenses.
The net cash flows for each Solvency line of business should agree to the gross best estimate reported in
ASR240 i.e. line 7 and 12 should agree to ASR240, lines 5 and 15 respectively.
24
margin (as calculated and reported in form 240). The percentage should be reported as absolute positive
amount.
3.7
ASR242: Non-life Technical Provisions (By Country)
Purposeofform: This form reports the split of gross best estimate for direct business (excluding accepted
reinsurance) by material countries.
Gross best estimate for different countries: Only the gross best estimate relating to direct business
should be reported here i.e. excluding reinsurance accepted. Information is required by localisation of risk
(i.e. country where the insured risk is based) for medical expenses, income protection, workers’
compensation, fire and other damage to property and credit suretyship lines of business. For all other lines of
business, information is required by country of underwriting. Information is required on all countries
representing up to 90% of the best estimate (direct business) with the rest reported in “other EEA” or “other
non-EEA”. This materiality applies at Lloyd’s level and hence syndicates should report best estimate by either
localisation of risk or country of underwriting for the following countries: United Kingdom, France, Germany,
Italy, Other EEA, United States of America, Australia, Bermuda, Canada, Japan, New Zealand and Other
non-EEA, irrespective of materiality to the syndicate.
per Solvency II line of business for all countries should agree to the sum of the amount (direct business)
reported in ASR240, lines 2, 6 and 16.
3.8
ASR260: Assets and liabilities by currency
Purposeofform: This form analyses assets and liabilities by currency.
The required materiality threshold for reporting this information for the insurer is that all currencies
representing in aggregate up to 90% of both assets and liabilities (in Solvency II value) should be reported
separately.
Materiality has been determined at Lloyd’s level and there are 6+1 currencies that syndicates will be required
to complete. These are: GBP, USD, EUR, CAD, AUD, JPY and OTHER. The syndicate must provide
information for all these currencies, regardless of whether the currency is material for them or not. All these
currencies should be reported unless where a syndicate has been given dispensation in the reporting of the
Technical Provisions Data return (TPD). However, we would expect that syndicates will regularly review the
relevancy of the dispensation, at least on an annual basis.
The data based on the original currency should be converted into reporting currency (GBP) using the rate of
exchange ruling at the end of the year and should be included in the appropriate/correct currency bucket. All
other currencies (outside the 6 currencies listed above) should be converted to GBP and included as
25
“OTHER”.
Please note that these currencies are based on the original currency rather than settlement currencies and
the amounts should be reported in GBP.
Where a syndicate has assets and liabilities in currencies other than the 6 listed currencies and these are
material to them i.e. represent 20% or more of both assets and liabilities, these should be reported
separately. Syndicates should not delete the 6+1 currencies already listed on the form and any additional
currencies required should be selected on ASR026. However, where a syndicate has a currency that is not
material and have been given a dispensation for currency reporting in the TPD, this dispensation may be
applied when completing this form. The currency that is not required to be reported separately due to the
dispensation should be included in the “OTHER” bucket. Lloyd’s expects that syndicates with dispensation
should reassess the appropriateness of the dispensation on a regular basis (at least once a year).
The amounts reported in this form in column H should agree with that reported in the balance sheet
(ASR002) as per the mapping provided below:
Assets
Investments (other than assets held for index-linked and unitlinked funds)
A30
Other assets within scope of AAD230 (other than index-linked
and unit linked funds)
A6+A35+A50
Assets held for index-linked and unit-linked funds
A31
A43
Deposits to cedants and insurance and reinsurance
receivables
A44+A45+A46
Any other assets
A1+A2+A3+A4+A5+A47+A48+A49+A51
Total assets
A52
Liabilities
Technical provisions (excluding index-linked and unit-linked
funds)
A56+A60+A64+A68
Technical provisions – index- linked and unit-linked funds
A72
Deposits from reinsurers and insurance and reinsurance
payables
A77+A82+A83
Derivatives
A79
Financial liabilities
A80+A81
Contingent liabilities
A74
Any other liabilities
A73+A75+A76+A78+A84+A85+A86+A87
Total liabilities
A88
26
3.9
ASR280: Life Technical Provisions
Purposeofform: This form reports an overview of life technical provisions (TP) by Solvency II line of
business.
however non-life syndicates with annuities arising from non-life insurance contracts other health insurance
should complete the form. Where applicable, the non-life syndicates should complete column H only,
“annuities stemming from non-life insurance contracts and relating to insurance obligations other than health
insurance obligations” and the life syndicates should complete all other relevant columns/lines of business.
This form requires reporting of technical provisions by Solvency II lines of business. Syndicate have already
been submitting similar information by risk codes, via the Technical Provisions Data return (TPD). To assist
in the completion of this form, there is already an existing mapping between risk codes and Solvency II lines
of business that was provided as part of the TPD reporting. This may be accessed via the following link:Risk
code mapping to SII class of business
Future expenses and other cash out- flows: As per Article 78(1) of the Directive, these are expenses that
Future premiums: These are cash-flows from future premiums and include premiums from accepted
reinsurance business (gross of acquisition costs).
(i)
Total technical provisions calculated as a whole (I1) should be equal to ASR002, A65
(ii)
Total gross best estimate (I2) should be equal to ASR002, A66
(iii)
Total risk margin (I9) should be equal to ASR002, A67
(iv)
Total recoverable from RI (I7) should be equal to ASR002, A40
27
3.10
ASR281: Life Gross Best Estimate by Country
Purposeofform:This form reports an overview of life gross best estimate by country.
however, non-life syndicates with annuities stemming from non-life insurance contracts and relating to
insurance obligation other than health insurance obligations should also complete this form. They should
complete row 3, “annuities stemming from non-life insurance contracts and relating to insurance obligation
other than health insurance obligations”. The life syndicate will be required to complete all other relevant lines
of business. This should be both direct and accepted reinsurance business.
lines 1 and 2.
3.11
ASR283: Health SLT Technical Provisions
Purposeofform: This form reports an overview of health SLT technical provisions (TP) by Solvency II line of
business.
insurance should also complete this form. Where applicable, the non-life syndicates should complete column
E only, “annuities stemming from non-life insurance contracts and relating to health insurance obligations”
and the life syndicates should complete all other relevant columns/lines of business.
SLT means: Similar to life techniques.
Future expenses and other cash out-flows: As per Article 78(1) of the Directive, these are expenses that
Future premiums: These are cash-flows from future premiums and include reinsurance premiums.
(i)
Total technical provisions calculated as a whole (F1) should be equal to ASR002, A61
(ii)
Total gross best estimate (F2) should be equal to ASR002, A62
28
(iii)
Total Risk margin (F9) should be equal to ASR002, A63
(iv)
Total recoverable from RI (F7) should be equal to ASR002, A39
3.12
ASR284: Health SLT Gross Best Estimate by Country
Purposeofform:This form reports an overview of health SLT gross best estimate by country.
insurance should also complete this form. Where applicable, the non-life syndicates should complete row 3
only, “annuities stemming from non-life insurance contracts and relating to health insurance obligations” and
the life syndicates should complete all other relevant lines of business. This should be both direct and
accepted reinsurance business.
lines 1 and 2.
3.13
ASR510: Minimum Capital Requirement – Non-life
calculation.
The calculation of the MCR combines a linear formula with a floor of 25% and a cap of 45% of the SCR. The
MCR is subject to an absolute floor, expressed in euro, depending on the nature of the undertaking (as
defined in Article 129 (1) (d) of the Solvency II Directive). However, these will not apply at syndicate level and
the reported MCR reported on this form will be the result of applying set factors to the net technical provisions
(excluding risk margin) and net written premiums.
The written premiums should be for the preceding 12 months to the reporting date and should be net of
reinsurance premiums ceded which corresponds to these premiums.
The definition for written premium in the draft delegated acts is as follows:
29
'written premiums' means, in relation to a specified time period, the premiums due to an insurance or
reinsurance undertaking during that time period regardless of the fact that such premiums may relate
in whole or in part to insurance or reinsurance cover provided in a different time period’
The above definition is not GAAP but rather on a cash flow basis. Hence if bound but not incepted contracts
(BBNI) are due during the period under consideration, then these should be considered as written premium,
for example:
Full Premium (£m)
Due by 2014
Year End (£m)
Due after 2014
Year End (£m)
2014 YoA (Incepted by 2014 year end)
25
20
5
75
50
25
15
10
5
Total
115
80
35
The written premium on a UK GAAP basis would be £25m (the top left most cell). The written premium on a
Solvency II basis is only the amounts due to be received (whether received or not) in the 2014 calendar year
and this would be £80m.
amount per corresponding lines of business as reported in ASR240, lines 1 and 26 (where the amounts
reported in ASR240 are positive). Hence the total net technical provisions should agree to sum of ASR240,
Q1 plus ASR240, Q26.
(i) EUR 2,500,000 for non-life insurance undertakings, including captive insurance undertakings, save in
(ii) EUR 3,700,000 for life insurance undertakings, including captive insurance undertakings
(iii) EUR 3,600,000 for reinsurance undertakings, except in the case of captive reinsurance undertakings, in
We would expect that most non-life syndicates will be writing at least one of the classes 10-15 and hence the
expected absolute floor to be reported within line 23 would be EUR 3,700,000. The amount should be
translated to GBP using the closing rate at the end of the period.
30
3.14
ASR511: Minimum Capital Requirement – Life
calculation.
amount per corresponding lines of business as reported in ASR280/ASR283, lines 1 and 8 (where amounts
reported in ASR280 and ASR283 are positive).
The non-life syndicates with annuities arising from non-life insurance contracts should also report in this form
MCR arising from these contracts. Hence, relevant amounts should be reported within lines 4 and 5.
Syndicates are not expected to be writing with profit and unit linked insurance contracts, hence lines 1 to 3
should be zero.
Capital at risk for all life (re)insurance obligations: This is the total capital at risk in relation to all contracts
that give rise to life insurance or reinsurance obligations, equivalent to total sum insured less the value of
technical provisions for such contracts.
(iv) EUR 2,500,000 for non-life insurance undertakings, including captive insurance undertakings, save in
(v) EUR 3,700,000 for life insurance undertakings, including captive insurance undertakings
(vi) EUR 3,600,000 for reinsurance undertakings, except in the case of captive reinsurance undertakings, in
We would expect that life syndicates would report the absolute floor of the MCR (line 12) as EUR 3,700,000
but translated to GBP using the closing rate at the end of the period.
3.15
ASR522: Solvency Capital Requirement – for syndicates on full internal models
Purposeofform: This form reports the calculation of SCR using a full internal model.
This form is required with respect to the prospective reporting year, for example, when reporting for the year
end 2014, the reporting year to be indicated on the form should be 2015 as the SCR being reported would
relate to business due to be written in 2015. The SCR should be the one year amount and also any capital
add-on should be the one year amount.
The risk components listed in the form are similar to those required in the Lloyd’s Capital Return (LCR).
Hence the amount reported in this form, per risk component, should agree to the amount reported in the LCR
submitted in September (including any agreed capital add-on) or a subsequent updated LCR that has been
agreed with Lloyd’s.
31
The difference between gross and net SCR is the impact of loss absorbing capacity of technical provisions
and deferred taxes. According to Article 108 of the Solvency II Directive, the only element to be considered
as a “loss absorbing capacity of technical provisions” is the future discretionary benefits of insurance
contracts. These two would not apply to syndicates, hence the gross and net SCR amounts should be the
same.
Modelling approach to calculation of loss absorbing capacity of technical provisions



Not modelled (NM)
Depending on each case, the information reported in cells D1 to D5, G1 to G5 and E9 will vary as follows:

capacity (gross SCR). Also, cell E9 should not be reported and an estimate of an adjustment should be
reported in cell E8 for information only

including this loss absorbing capacity (net SCR). Also, cell E9 should not be reported and an estimate of
an adjustment will be reported in cell E8 for information only

absorbing capacity, i.e. gross SCR and cell E9 will be reported.
Modelling approach to calculation of loss absorbing capacity of deferred taxes



Not modelled (NM)
Depending on each case, the information reported in cells D1 to D5, G1 to G5 and F9 will vary as follows:

capacity (gross SCR). Also, cell F9 should not be reported and an estimate of an adjustment should be
reported in cell F8 for information only

including this loss absorbing capacity (net SCR). Also, cell F9 should not be reported and an estimate of
an adjustment will be reported in cell F8 for information only

absorbing capacity, i.e. gross SCR and cell F9 will be reported.
Line 7 – Diversification: This is the total of the diversification within components calculated using the full
internal model.
32
Line 11 – Capital requirement for business operated in accordance with Art. 4 of Directive 2003/41/EC
(transitional): Directive 2003/41/EC (transitional) deals with activities and supervision of institutions for
occupational retirement provision. This does not apply to syndicates hence we would not expect any amount
to be reported within this line.
Line 12 – Solvency capital requirement, excluding capital add-on: This should agree to the net SCR amount
reported in the final LCR agreed with Lloyd’s.
Line 13 – Capital add-ons: This is the amount of capital add-ons that had been agreed with Lloyd’s by the
deadline date of submitting the return to Lloyd’s.
Line 14 – Total amount of Notional Solvency Capital Requirements for ring fenced funds (other than those
related to business operated in accordance with Art. 4 of Directive 2003/41/EC (transitional)): We do not
consider to have any ring fenced funds at Lloyd’s, hence no amount should be reported within this line.
Line 15 – Total amount of Notional Solvency Capital Requirements for remaining part: This is total SCR
reported within line 10, less any amount that relates to ring fenced funds (line 14). Hence considering that no
amount is expected to be reported within line 14, the amount reported within this line should agree to that
reported within line 10.
Line 16 – Diversification between ring fenced funds and between ring fenced funds and remaining part: We
do not consider to have any ring fenced funds at Lloyd’s, hence no amount is expected within this line.
Line 17 – Gross discretionary benefits: These are amounts of technical provisions without risk margin in
relation to future discretionary benefits gross of reinsurance.
Line 18 – Net discretionary benefits: These are amounts of technical provisions without risk margin in
relation to future discretionary benefits net of reinsurance.
Line 19 – Date of formal approval of internal model: This should be the date when the syndicates’ internal
models are approved. This will be communicated once the Lloyd’s internal model process with PRA has been
finalised, hence for interim reporting, please report this as 2014/12/31.
33
Section 4: form instructions for ANNUAL ASSET DATA
4.1
AAD010: Control page
syndicate number and managing agent.
We do recognise, however, that persons signing off the return may not necessarily be those to whom queries
should be sent to. If this is the case, please email Market Finance via [email protected],
with details of an alternative contact who will be included on the queries distribution list relating to the
syndicate.
Due to the volume of data being reported in the Annual Asset Data (AAD), this return is asynchronous.
Hence syndicates will not be able to view the forms as they appear on the specifications, but will get playback
summaries of the information loaded into CMR.
4.2
AAD230: Investment Data – Portfolio List
Purposeofform: This form collects a detailed list of investments and it provides a full vision of the risks in the
investment portfolio.
All types of investments (including bank deposits and deposits relating to reinsurance accepted) should be
reported in this form. However, derivatives are not included in this form because they are required to be
completed in specific form i.e. AAD233 for open derivatives. In the case of investment funds, these should be
included in this form at a total level and not on a look-through basis, as the look-through is reported on
AAD236 i.e. only one line per fund should be reported on this form.
All investments, other than the ones listed below, should be reported individually, per ID code. However, in
the case of following assets:

Cash and deposits (CIC XT71, XT72, XT73, XT74 & XT79), only one line per pair (bank and currency)
should be reported

Deposits to cedants (CIC XT75), only one line per counterparty should be reported

Mortgage and loans (CIC XT8#); for mortgages & loans to individuals, including loans on policies, there
should be only two lines, one line regarding loans to senior management and another regarding loans to
other individuals without distinction between individuals
This form will be used for collecting information required for the Lloyd’s Internal Model (LIM) as well as for
reporting to the PRA. To ensure that adequate information for LIM is available, the original EIOPA template
has been tailored to include fields to collect information on funds in syndicate (FIS). The two fields that have
been added are market value (Non-FIS) and market value (FIS).
34
Lloyd’s managed and cash sweep investment funds
Lloyd’s are proposing (subject to agreement with the PRA) that funds managed by Lloyd’s Treasury &
Investment Management (LTIM) (ASL, Overseas Trust Funds and PTF Commingled Funds) and the primary
sweep accounts will be reported as investment funds in AAD 230 with full look-through information provided
by Lloyd’s in AAD236.
When reporting these investments please include as a single line entry on both the AAD 230 and 236;
classifying the “Level of look-through” as “O” and the “CIC” as “XL39” on the 236. Refer to the AAD 230 and
236 Lloyd’s managed investment fund (LMIF) templates on the AAD/QAD FAQ document for detailed
information on how to report these investments. The templates provide the correct data for all the AAD fields;
syndicates will only need to add their total valuation for each fund (please remember that all the valuations
must be reported in GBP). The complete list of underlying assets will then be applied by Lloyd’s upon
submission.
Please use the LMIF ID Codes as per the below tables and note that these fund codes should only be
used for trust fund assets managed by Lloyd’s Treasury & Investment Management (LTIM) (ASL,
Overseas Trust Funds and PTF Commingled Funds). All other syndicate assets within your trust
funds should be reported as directly held investments i.e. individual securities should be reported
only in AAD230 and investment funds should be reported as a single line in AAD230 and lookthrough in AAD236.
Additional Securities Limited (ASL)
LMIF
ASLAU0001
ASL – Australia
ASLBS0001
ASL – Bahamas
ASLBR0001
ASL – Brazil
ASLKY0001
ASL - Cayman Islands
ASLGD0001
ASL – Grenada
ASLHK0001
ASL - Hong Kong
ASLNA0001
ASL – Namibia
ASLSG0001
ASL – Singapore
ASLVC0001
ASL - St Vincent & Grenadines
ASLCH0001
ASL – Switzerland
ASLTT0001
ASL – Trinidad
The ASL Lloyd’s Asia and ASL Singapore assets are managed together and should therefore be
combined in your submission under ASL Singapore (ASLSG0001)
35
Overseas Securities Trust Funds (OSTF)
LMIF
AJATF2001
Australian JATF(2)
ATF000001
Australian Trust Fund
CMF000001
Canadian Margin Fund
ITF000001
Illinois Trust Fund
JATFRE001
JATF Reinsurance
JATFSL001
JATF Surplus Lines
KJATF0001
Kentucky JATF
KTF000001
Kentucky Trust Funds
SATTF0001
South Africa Transitional Fund
SATF00001
South Africa Trust Fund
PTF Commingled Funds
LMIF
PTFCA0001
Canadian PTF Commingled Account
LCBACA001
LCBA CAD Commingled Account
LCBAUS001
LCBA USD Commingled Account
LDTF00001
LDTF Commingled Account
PTFEU0001
PTF EURO Commingled Account
PTFGBP001
PTF Sterling Commingled Account
Cash Sweep Investment Funds
LMIF
FIERACAD1
FIERA Canadian Dollar Short Term Blended Investment Account (RBC Sweep)
FIERAUSD1
FIERA US Dollar Short Term Blended Investment Account (RBC Sweep)
WALF00001
Western Asset (US Dollar) Liquidity Fund (WALF) previously Citi Institutional
Liquidity Fund (CILF)
WAICR0001
Western Asset Institutional Cash Reserves (WAICR) previously Citi Institutional
Cash Reserve (CICR)
36
Investments issued by government agencies or issued with a government guarantee and private
equity investments
The definition provided by EIOPA on government bonds includes “bonds issued by public authorities, whether
by central governments, supra-national government institutions, regional governments or municipal
governments”. This definition does not include agency and government guaranteed bonds, therefore Lloyd’s
expects these assets to be classified as corporate bonds (CIC ##2#) and reported as such until further
clarification is received from EIOPA/PRA. In addition, EIOPA does not provide specific CIC sub-categories
for investments issued by government agencies, investments issued with a government guarantee, reverse
repurchase agreements or private equity investments, but Lloyd’s requires these assets to be identified for
modelling purposes. Therefore, please complete the Issue type field for agency, government guaranteed
instruments, reverse repurchase agreements and private equity investments as per the below table.
Asset Type
Issue Type
Agency
AGENCY
Government Guaranteed
GOVTGTD
Private Equity
PRIVEQ
Reverse Repurchase Agreements
REVREPO
Other
NA
For reverse repurchase agreements, Lloyd’s also requires syndicates to identify the asset type of the
collateral; when reporting a reverse repurchase agreement in AAD230, the CIC field should be completed
using the asset class of the collateral. When reporting a reverse repurchase agreement in AAD 236 the CIC
and the Underlying asset category fields should also be completed using the asset class of the collateral.
These are bonds issued by public institutions established by a commitment between national states, e.g.
issued by a multilateral development bank as listed in Annex VI, Part 1, Number 4 of the Capital
Requirements Directive (2006/48/EC) or issued by an international organisation listed in Annex VI, Part 1,
Number 5 of the Capital Requirements Directive (2006/48/EC). These are:
Multilateral banks

International Bank for Reconstruction and Development

International Finance Corporation

Inter-American Development Bank

Asian Development Bank

African Development Bank

Council of Europe Development Bank

Nordic Investment Bank

Caribbean Development Bank

European Bank for Reconstruction and Development

European Investment Bank

European Investment Fund
37

Multilateral Investment Guarantee Agency.
International organisations

European Community

International Monetary Fund

Bank for International Settlements.
blank.
Asset held in unit linked and index linked funds (Y/N): There are two options for reporting i.e. “Y” or “N”
and since syndicates do not write unit linked and index linked contracts, the option to be reported should be
“N”.
ID code: All assets reported in AAD230 should be allocated a unique ID code and where there are multiple
holdings of the same asset these should be aggregated and reported as one line. The ID code should be
ISIN if available, other recognised code (CUSIP, CINS, Sedol, Bloomberg ticker etc.) or the syndicate’s
specific code if nothing else is available. In the case of cash at bank, the bank account number may be used
as ID code. Where this is not possible, a unique ID should be allocated and this should be used in all future
submissions. In the case of investment funds, the ID code reported in this form should be the investment
fund code (LMIF code if the fund is a Lloyd’s Treasury & Investment Management (LTIM) fund or a cash
sweep investment fund) and, for the same investment fund, this code should be the same as the investment
fund code reported in AAD236.
CINS, Bloomberg, LMIF, undertaking specific and other. This is presented in the CMR as a closed list and it
is included in the reference data. For each investment fund, the ID code type reported on this form should be
the same as the Investment fund code type reported in AAD236.
Assets pledged as collateral: This identifies assets in the balance sheet that have been pledged as
collateral, i.e. collateral pledged (CP), collateral for reinsurance accepted (CR), collateral for securities
borrowed (CB), repos (R) and not applicable (NA). For partially pledge assets two lines for each asset should
be reported, one for the pledged amount and other for the remaining part.
Security title: This is the name of the security and it is not applicable for mortgages and loans on individuals
within CIC category 8 (Mortgages and Loans) as these are not required to be reported individually, and for
Plant and Equipment (CIC XT95). For cash in hand and cash at bank, the security title may be referred to as
“cash in hand” and “cash at bank” respectively.
Issuer name: An issuer is defined as the entity that offers securities representing parts of its capital, debt,
derivatives etc., for sale to investors. For investment funds, the issuer name is the name of the funds
manager. This is not applicable for mortgages and loans on individuals within CIC category XT8# (Mortgages
and Loans), as these are not required to be reported individually, and for Property (CIC category XT9#).
Issuer code: This should be completed with legal entity identifier (LEI) or interim entity identifier (PRE-LEI).
LEI is a unique identifier (20-digit, alpha-numeric code) associated with a legal person or structure that is
organised under the laws of any jurisdiction (excluding natural persons) and created in accordance with the
38
international standard ISO 17442. LEIs will enable consistent and unambiguous identification of parties to
financial transactions, including non-financial institutions.
The Legal Entity Identifier (LEI) initiative is designed to create a global reference data system that uniquely
identifies every legal entity or structure, in any jurisdiction, that is party to a financial transaction. Endorsed by
the G20, the establishment of a Global LEI System (GLEIS) is critical to improving measurement and
monitoring of systemic risk. Global, standardised LEIs will enable regulators and organisations to more
effectively measure and manage counterparty exposure while also resolving long standing issues on entity
identification across the globe. To aid global allocation of LEIs, Local Operating Units (LOUs) have been
formed and must be sponsored by local regulators to assign and maintain LEIs to firms on a cost recovery
basis.
While the GLEIS is being developed official Pre-LOUs have been introduced to provide an interim solution.
As with the proposed official GLEIS model, Pre-LEIs are allocated by Pre-LOUs according to the agreed
international standard which outlines the structure and minimum data record requirements. In the UK, the
London Stock Exchange has been endorsed by the Regulatory Oversight Committee (ROC) as an authorised
Pre-LOU for the global allocation of LEIs.
Where a code does not exist, syndicates should leave this field blank.
Issuer code type: This is the type of issuer code i.e. LEI or PRE-LEI. Where the issuer code field was left
blank because the code does not exist, “NA” should be reported in this field.
Issuer sector: This is the economic sector of the issuer of the security and should be based on the latest
version of the NACE code. The letter reference of the NACE code identifying the section should be used as a
minimum for identifying sectors, for example, “A” or “A.01.11” would be acceptable except for NACE relating
to financial and insurance activities for which the letter identifying the section followed by the 4 digits code for
the class should be used (for example, “K.66.30” to denote “fund management activities”).
This item is not applicable for CIC category 8, mortgages and loans (for mortgages and loans on individuals,
as those assets are not required to be individualised), and CIC XT95, plant and equipment (for own use).
Issuer group: This is the name of the ultimate parent undertaking of the issuer. For investment funds, the
group relation is in relation to the fund manager.
Issuer country: This is the country where the legal seat of issuer is located. For investment funds, the
country is relative to the funds manager. The legal seat, for this purpose, should be understood as the place
where the issuer head office is officially registered, at a specific address, according to the commercial
register (or equivalent). The International Organisation for Standardisation (ISO) alpha 2 codes should be
used, i.e. two letter country codes. For example, “US” to denote United States, except for supranational
issuers and European Union institutions where “XA” and “EU” should be used respectively.
Country of custody: This is the ISO code of the country where undertaking assets are held in custody. For
identifying international custodians (e.g. Euroclear), the country of custody will be the one corresponding to
the legal establishment where the custody service was contractually defined. Where there are multiple
custodians, the country of the biggest custodian should be reported i.e. one that holds securities with the
highest value.
39
securities. See Appendix 1 for the CIC table. When classifying an asset using the CIC table, syndicates
should take into consideration the most representative risk to which the asset is exposed. The code should
comprise of four characters, for example, ES15 denoting, treasury bonds listed in Spain. When identifying the
location of the asset, the country ISO code where the asset is traded should be used. When determining CIC
for supranational issuers and European Union institutions “XA” and “EU” should not be used, but instead the
country ISO code where the security is traded/listed should be used. If this is traded in more than one
country, then the country used for valuation reference should be used.
Participation: This is defined in article 13(20) of the Solvency II Directive as “ownership, direct or by way of
control, of 20% or more of the voting rights or capital of an undertaking”. These are the five different criteria
for classifying participation:

the asset is not a participation (N)

it is a participation but not consolidated at group level and not strategic (YNGNS)

it is a participation not consolidated at group level but strategic (YNGS)

it is a participation, consolidated at group level and not strategic (YGNS)

it is a participation, it is consolidated at group level and is strategic (YGS)
Lloyd’s would not be expecting any syndicate to have participations hence the expected selection is “N”
should be used. It only applies to CIC categories ##1#, ##2#, ##42 (when applicable, e.g. for investment
funds mainly invested in bonds), ##5# and ##6#.
Quantity: This depends on the type of assets (e.g. number of shares for equity and investment funds). This
is not applicable for CIC categories ##1#, ##2#, ##5#, ##6#, XT7#, XT8# and XT9#.
Total par amount: This is a new field introduced in the template so as to separate quantity (for shares and
investment funds) and par amount invested (for debt securities). This is the par value of debt securities i.e.
CIC categories ##1#, ##2#, ##5# and ##6# and will be the same as the amount previously reported in the
quantity field.
Unit Solvency II price: This depends on the type of assets (amount in GBP for shares or units held in
investment funds). This is not applicable for CIC categories ##1#, ##2#, ##5#, ##6#, XT7#, XT8# and XT9#.
Percentage of par Solvency II value: This is a new field introduced in the template in line with the
introduction of the total par amount field. This is the percentage of market value/par value (only for CIC 1,2,5
and 6) and is similar to the unit Solvency II price previously reported for debt securities (note that this field
40
should be completed as a percentage and not a ratio as previously reported in the unit Solvency II value).
The market value should be the clean price (i.e. should not include accrued interest). For example,
percentage of par Solvency II value for a corporate bond with a clean market price of £ 900 and a par value
of £ 1,000 should be reported as 90. This is not applicable for CIC categories ##3#, ##4#, XT7#, XT8# and
XT9#.
Solvency II valuation method: Identify the valuation method used when valuing assets. This should either
be one of the three options below:



Acquisition price: This is the acquisition price of each asset i.e. unit price per share/unit held in the
investment fund. Where there are different acquisition prices due to acquisitions made at different dates, an
average acquisition price must be used and consequently only one line is completed for one single asset,
independently of having more than one acquisition. This is not applicable to CIC categories XT7# and XT8#.
Total Solvency II amount: This is the Solvency II value of the investments and it corresponds to:

Multiplication of “Quantity” by “Unit Solvency II price” plus “Accrued interest” (Quantity x Unit Solvency II
price + Accrued interest) for the following CIC categories; ##3# and ##4#. It must also equal to the sum
of Market value (Non-FIS), Market value (FIS) and Accrued interest; or

Multiplication of “Total par amount” by “Percentage of par Solvency II value” plus “Accrued interest” (Total
par amount x Percentage of par Solvency II value + Accrued interest) for the following CIC categories;
##1#, ##2#, ##5# and ##6#. It must also equal to the sum of Market value (Non-FIS), Market value (FIS)
and Accrued interest.
Maturity date: This is only applicable for CIC categories ##1#, ##2#, ##5#, ##6# and ##8# and corresponds
always to the maturity date, even for callable securities. The date should be reported in ISO date format i.e.
YYYY/MM/DD and for perpetual securities, the date should be reported as 9999/12/31. This date should be
greater than the reporting end date.
Accrued interest: This is the amount of interest that is to be received in future from each asset and it forms
part of Total Solvency II amount.
Market value (Non-FIS): This is the market value (clean value) of the securities held in the premium trust
funds (PTFs) in respect of open and run-off reporting years of account. Where the valuation basis adopted in
the QMA is the same as that required for Solvency II, the total market value (Non-FIS) should tie back to the
amounts reported in the QMA201.
Market value (FIS): This is the market value (clean value) of the securities held as, either separately or
commingled within the syndicates PTFs, in respect of funds in syndicates (FIS). Where the valuation basis
adopted in the QMA is the same as that required for Solvency II, the total market value (FIS) should tie back
to the amounts reported in the QMA202.
appropriate code as listed on page 37. If none of the specific options is applicable please report “NA”.
41
4.3
AAD233: Derivatives Data – Open Positions
Purposeofform: This form reports information on all derivatives held by the syndicate. It provides information
on risks and risk mitigating strategies followed through the use of derivatives.
This includes all derivatives contracts that existed during the reporting period and were not closed prior to the
end of the reporting period. Derivatives to be reported in this form are the ones directly held so please don’t
include the ones held indirectly through investment funds or structured products. The value of the open
contracts at the end of the reporting year should agree to ASR002, lines A27 and A79.
Lloyd’s expect syndicates to report one line for each derivative, except for derivatives which have more than
one currency as these derivatives should be split into the components and reported in different lines. Foreign
exchange contracts, for example, should be populated as two entries (one for each currency); a long (buy)
leg and a short (sell) leg. Worked examples of derivatives data reported on AAD233 are available in the
AAD/QAD FAQ document (Valuation and Balance Sheet section of Lloyds.com).
blank.
Derivatives held in unit linked and index linked funds (Y/N): There are two options for reporting i.e. “Y” or
“N” and since syndicates do not write unit linked and index linked contracts, the option to be reported should
be “N”.
ID code: This should be ISIN if available, other recognised code (CUSIP, Sedol, Bloomberg ticker etc.) or
syndicate’s specific if nothing else is available.
When a derivative is reported in multiple lines (e.g. a foreign exchange contracts reported in two lines, one
for each leg) the same ID code should be used for all the related entries.
Bloomberg, undertaking specific and other. This is presented in the CMR as a closed list and it is included in
the reference data.
Counterparty name: This is the identification of the counterparty of the derivative contract (derivative
exchange or the counterparty for OTC derivatives).
Counterparty code: This is legal entity identifier (LEI) or interim entity identifier (PRE-LEI) i.e. an ISO code
that identifies the counterparty. Where a code does not exist, syndicates should leave this field blank.
Counterparty code type: This is the type of counterparty code i.e. LEI or PRE-LEI. Where the counterparty
code field was left blank because the code does not exist, “NA” should be reported in this field.
External rating: This is the rating of the counterparty given by an external rating agency and is only
applicable to OTC or bespoken derivatives. The syndicate must report the external rating (only the rating
symbol, without any outlook) that in their perspective is best representative and used internally for SCR
calculations. This field must always be filled in, hence where a security is not rated, “NR” should be reported.
Rating agency: This is the rating agency giving the external rating and should be selected from a closed list.
Similar to the external rating, where a security is not rated, “NR” should be reported.
Counterparty group: This is the name of the ultimate parent undertaking of the counterparty.
42
Counterparty group code: This is legal entity identifier (LEI) or interim entity identifier (PRE-LEI) i.e. an ISO
code that identifies the ultimate parent undertaking of the counterparty. Where a code does not exist,
syndicates should leave this field blank.
Counterparty group code type: This is the type of counterparty group code i.e. LEI or PRE-LEI. Where the
counterparty group code field was left blank because the code does not exist, “NA” should be reported in this
field.
Contract name: This is the name of the derivative contract.
Asset or liability underlying the derivative: This is the asset or liability underlying the derivative contract.
This should be reported in the form of the ID code and it should be provided for derivatives that have a single
underlying instrument in the syndicate’s portfolio.
Currency (ISO code): This is the currency of the derivative and should be presented as the ISO currency
code, for example, CAD for Canadian Dollar. For derivatives that have more than one currency, it should be
split into the components and reported in different lines.
Foreign exchange contracts should be populated as two entries (one for each currency); a long (buy) leg and
a short (sell) leg.
securities. Please see Appendix 1 for the CIC table. When classifying an asset using the CIC table,
syndicates should take into consideration the most representative risk to which the asset is exposed to. The
code should comprise of four characters, for example, FIC3 denoting, put option on currency listed in
Finland.
Use of derivatives: This describes the use of derivative i.e. micro / macro hedge (MI/MA), efficient portfolio
management (EPM). Micro hedge refers to derivatives covering a single financial instrument, forecasted
transaction or liability. Macro hedge refers to derivatives covering a set of financial instruments, forecasted
transactions or liabilities.
Delta: This measures the rate of change of option value with respect to changes in the underlying asset's
price. This is only applicable to CIC categories ##B# and ##C# (Call and put options).
Notional amount: This is the amount covered or exposed to the derivative. For futures and options, this
corresponds to the contract size multiplied by the number of contracts; and for swaps and forwards, this
corresponds to the contract amount. The notional amount refers to the amount that is being hedged /
invested (when not covering risks). If several trades occur, this should be the net amount at the reporting
date.
Lloyd’s expect the notional amount to be reported always in GBP and as a positive value. When a derivative
is reported in two or more lines (e.g. a foreign exchange contracts reported in two lines, one for each leg), the
same GBP equivalent notional amount should be reported in both lines.
Long or short position: A holder of a long position owns the security or notional amount at the contract
inception, while a holder of a short position will own the security or the nominal amount at the end of the
derivative contract. For derivatives that have more than one currency, the syndicates should report both the
long (or buy) side of the derivative contract and the short (or sell) side in different lines.
The long and short position for swaps is defined relatively to the notional amount. For interest rate swaps
(CIC categories ##D1 and ##D3) the syndicate has to report one of the following: "FX-FL (fixed-for-floating)",
"FX-FX (fixed-for-fixed)", “FL-FX (floating-for-fixed)” or "FL-FL (floating-for-floating)".
43
Premium paid/received to date: This is the amount received (if sold) or paid (if bought), for options and
also up-front and periodical amounts paid / received for swaps, since inception. If the cost is zero, report “0”.
Number of contracts: These are the number of derivative contracts in the portfolio and it should be the
number of contracts entered into. The number of contracts should be the ones outstanding at the end of the
period.
Contract dimension: These are the number of underlying assets in the contract (e.g. for equity futures, it is
the number of equities to be delivered per derivative contract at maturity, for bond futures it is the reference
amount underlying each contract). This only applies to futures (CIC category ##A#) and options (CIC
categories ##B# and ##C#).
Trigger value: This is the reference price for futures, strike price for options, currency exchange rate or
interest rate for forwards, etc. This is not applicable to interest rate and currency swaps.
In the case of more than one trigger over time, report the trigger value during the reporting period.
Unwind trigger of contract: This is to identify the event that causes the unwinding of the contract. Possible
options are:

B - bankruptcy of the underlying or reference entity

F - adverse fall in value of the underlying reference asset

R - adverse change in credit rating of the underlying assets or entity

N - novation i.e. the act of replacing an obligation under the derivative with a new obligation or replacing a
party of the derivative with a new party

M - multiple events or a combination of events

O - other events.
Maximum loss under unwinding event: This is the maximum amount of loss if an unwinding event occurs
and it should be reported as negative value. It is only applicable to CIC category ##F#.
Swap outflow amount: This is the amount delivered under the swap contract, during the reporting period. It
corresponds to the interest paid for interest rate swap (IRS) and amounts delivered for currency swaps, credit
swaps, total return swaps and other swaps. It is only applicable to CIC category ##D#.
Swap inflow amount: This is the amount received under the swap contract, during the reporting period. It
corresponds to interest received for IRS and amounts received for currency swaps, credit swaps, total return
swaps and other swaps. It is only applicable to CIC category ##D#.
Swap delivered currency: This is the currency of the swap price and it should be in form of ISO currency
code. This is only applicable for currency swaps (CIC ##D2) and interest rate and currency swaps (CIC
##D3).
Swap received currency: This is the currency of the swap notional amount and it should be in form of ISO
currency code. This is only applicable for currency swaps (CIC ##D2) and interest rate and currency swaps
(CIC ##D3).
Trade date: This is the date of the trade of the derivative contract. When various trades occur for the same
derivative, only the first trade date of the derivative and only one line for each derivative (no different lines for
each trade) should be reported. The date should be reported in ISO date format (YYYY/MM/DD).
44
Maturity date: This is the contractually defined date of close of the derivative contract, whether at maturity
date, expiring date for options (European or American), etc. The date should be reported in ISO date format
(YYYY/MM/DD). The maturity date is expected to be greater than the reporting end date.
Duration: This is the residual modified duration of the underlying asset, in years, for derivatives for which a
duration measure is applicable.
Solvency II valuation method: This is the valuation method used when valuing assets. This should be one
of the three options below:



Total Solvency II amount (Non-FIS): This is the market value of the derivatives (i.e. the value of the
derivative contract and not of the underlying asset) held in the premium trust funds and can be positive,
negative or zero. Derivative assets (profits) should be reported as positive while liabilities (losses) as negative
values.
one for each leg), the syndicate should report the total Solvency II amount (Non-FIS) on only one line i.e.
either on the buy (L) side or on the sell (S) side.
Total Solvency II amount (FIS): This is the market value of the derivatives (i.e. the value of the derivative
contract and not of the underlying asset) held as funds in syndicates (FIS) and can be positive, negative or
zero. Derivative assets (profits) should be reported as positive while liabilities (losses) as negative values.
one for each leg), the syndicate should report the total Solvency II amount (FIS) on only one line i.e. either on
the buy (L) side or on the sell (S) side.
Total Solvency II amount: This is the market value of the derivative (i.e. the value of the derivative contract
and not of the underlying asset) as of the reporting date and and it should be equal to the sum of Total
Solvency II amount (Non-FIS) and Total Solvency II amount (FIS). It can be positive, negative or zero.
Derivative assets (profits) should be reported as positive values while derivative liabilities (losses) as negative
values.
For every derivative Lloyd’s expect the total Solvency II amount (in absolute terms) to be lower than the
notional amount.
4.4
AAD236: Investment Funds (look-through approach)
Purposeofform: This form reports information for each investment fund at a security by security level.
All the investment funds reported in the balance sheet (ASR002) and AAD230 should be reported in this
form. The syndicate should ensure that reconciliation between this form, AAD230 and the balance sheet is
carried out at a fund level as well as in aggregate. The level of look-through on investment funds should
ensure that all material risks are captured. Solvency II requires this form to be reported at asset category
level. However since this form is required for LIM purposes, additional fields (similar to those required in
AAD230) have been added and the form will be required to be completed at security level. Look-through
should be performed based on the following three options:
45

Standard (S): This is the security level look-through. Where there are a number of iterations of the lookthrough approach (for example, where an investment fund is invested in other investment funds), the
number of iterations should be sufficient to ensure that all material market risks are captured. When
performing a standard look-through, syndicates should report only one line for each underlying security,
even if the underlying security is a derivative with more than one currency (e.g. a forward exchange rate
agreement). In the case of derivatives that are part of an investment fund, these should not be reported
in AAD233.

Mandate (M): This option is acceptable where a full security level look-through is not possible. For
collective investment schemes that are not sufficiently transparent, the investment mandate/fund’s
prospectus guidelines should be used as a reference. It should be assumed that the scheme invests in
accordance with its mandate in such a manner as to produce the maximum overall capital requirement

Other (O): Where security level and mandate look-through options are not possible, funds should be
treated as equity and classified as “Other”. This assumes a high level of investment risk and will always
have a CIC of XL39. We also request that the option of “Other” is used when reporting those investments
in Lloyd’s Treasury & Investment Management (LTIM) Funds (ASL, Overseas Trust Funds and PTF
Commingled Funds) and the primary sweep accounts (as listed above previously). Lloyd’s will then apply
the full “Standard” look-through on behalf of the syndicate. This means that for all investment funds
reported with a level of look-through of “O”, only one line per fund should be reported on this form.
Considering that this information is also being collected for LIM purposes, where possible, syndicates are
required to use a security level look-through for investment funds and to refer to the investment
mandate/prospectus if this is not possible. Please note that only one level of look-through per investment
fund should be reported. Where there is a combination of standard and mandate look-through approaches
within a single investment fund, please report the level of look-through as “M” mandate for the whole fund.
Investment fund code: This should be ISIN if available, other recognised code (CUSIP, Sedol, Bloomberg
ticker etc.) or syndicate’s specific if nothing else is available. LMIF code should be used if the fund is a
Lloyd’s Treasury & Investment Management (LTIM) fund or a cash sweep investment fund. For each
investment fund, the investment fund code reported on this form should be the same as the respective ID
code reported in AAD230.
Investment fund code type: Type of ID Code used for the “Investment fund Code” item and this should be
one of the following: ISIN, CUSIP, Bloomberg, LMIF, undertaking specific and other. This is presented in the
CMR as a closed list and it is included in the reference data. For each investment fund, the Investment fund
code type reported on this form should be the same as the ID code type reported in AAD230.
ID code: This is the ID code of the securities in which a fund is invested. This should be ISIN if available,
other recognised code (CUSIP, CINS, Sedol, Bloomberg ticker etc.) or undertaking specific if nothing else is
available.
Where the level of look-through of a fund is “S” or “M”, Lloyd’s expect the ID codes to be the ID codes of the
underlying securities and to be different from the investment fund code. There should be no duplicate ID
codes reported within the same investment fund. Indicative ID codes can be used for “M” (e.g.
FUNDXYEQTY, FUNDXYGOVT, etc…).
Where the level of look-through is “O”, Lloyd’s expect the ID code to be the same as the investment fund
code.
ID code type: Type of ID Code used for the “ID Code” item and this should one of the following: ISIN,
CUSIP, CINS, Bloomberg, LMIF, undertaking specific and other. This is presented in the CMR as a closed
list and it is included in the reference data.
46
Security title: This is the name of the securities in which a fund is invested. For cash in hand and cash at
bank, the security title may be referred to as “cash in hand” and “cash at bank” respectively.
Where the level of look-through of a fund is “S” or “M”, security title should refer to the securities in which the
fund is invested.
Where the level of look-through is “O”, Lloyd’s expects the security title to be the name of the investment
fund.
Issuer group: This is the name of the ultimate parent undertaking of the issuer.Where the level of lookthrough of a fund is “S”, the issuer group should be the ultimate parent undertaking of the issuer of the
securities in which a fund is invested.
Where the level of look-through is “O” or “M”, the issuer group should be the ultimate parent undertaking of
the fund manager.
should be used. It only applies to CIC categories ##1#, ##2#, ##5# and ##6#. Duration is expected to be zero
when the level of look-through is “O”.
CIC: This is the Complementary Identification Code (CIC) of the securities in which a fund is invested. Please
see Appendix 1 for the CIC table. When classifying an asset using the CIC table, syndicates should take into
consideration the most representative risk to which the asset is exposed. The requirement to provide “lookthrough” data to underlying exposures of mutual funds and investment funds means that the “investment
funds” (CIC category ##4#) should not be used. In the case where no look-through is performed, i.e. level of
look-through is reported as “O”, this is treated as equity other, and the reported CIC should be XL39. CIC for
investment fund liabilities, where applicable, should be reported as “NA”.
Underlying asset category: This identifies the securities categories present in the investment fund and
these categories should be as defined in the CIC table. This should be the third character of the CIC. For
example, government bonds should be reported as “1” and Structured notes as “5”. However, for equity, CIC
category must be split between listed (3L) and non-listed (3NL). The investment fund’s liabilities should also
be identified with (L).
Where the Level of look-through is “O”, the underlying asset category should be “3NL”.
Geographical zone of issue: This should show a breakdown of asset category by issuer geographical zone
i.e. where the legal seat/head office of the issuer is located. This is to identify the geographical zone of the
security category, using the following closed list of geographical zones:
47

EEA

OECD (non-EEA)

RoW (rest of the world)
Total Solvency II amount (Non-FIS): This is the Solvency II value (including accrued interest) of the
securities held in the premium trust funds (PTFs), in respect of open and run-off reporting years of account.
II amount (Non-FIS) should tie back to the amounts reported in the QMA201 (plus respective accrued interest
Total Solvency II amount (FIS): This is the Solvency II value (including accrued interest) of the securities
held as, either separately or commingled within syndicates PTFs, in respect of funds in syndicates (FIS).
II amount (FIS) should tie back to the amounts reported in the QMA202 (plus respective accrued interest
Total Solvency II amount: This is the total Solvency II value (including accrued interest) of the securities
and it should be equal to the sum of Total Solvency II amount (Non-FIS) and Total Solvency II amount (FIS).
The “Total Solvency II amount” for each investment fund code reported on AAD236 should agree to the
“Total Solvency II amount” for the corresponding ID code reported on AAD230. Hence the sum of “Total
Solvency II amount” for all entries on AAD236 should equal the sum of “Total Solvency II amount” for all
investment fund entries on AAD230 (i.e. where the third character of the CIC on AAD230 is “4”).
appropriate code as listed on page 37. If none of the specific options is applicable please use “NA”.
Level of look-through: This indicates the level of look-through performed and selection should be as
follows:

Standard (S) – look-through is performed at security by security level

Mandate (M) – where investment funds are not sufficiently transparent, investment mandates should be
used

Other (O) – If the above is not achievable, the funds should be reported as “equity other”.
Depending on the level of look-through, some of the fields will not be required to be reported. Below is a table
showing what fields are required to be completed under each level of look-through:
All the fields (apart from “duration” that is not required when the level of look-through is “O”) are required to
be completed.
48
Section 5: QUALITATIVE REPORTING
5.1
Introduction
5.1.1
This section covers qualitative reporting as at 31 December 2014. This is required to ensure Lloyd’s
compliance with the EIOPA Guidelines on Pillar 3 reporting, as enacted for within the United
Kingdom by the Prudential Regulation Authority (PRA) Supervisory Statement SS4/13.
5.1.2
EIOPA Guidelines on provision of information to national supervisory authorities introduce qualitative
reporting – specifically on systems of governance, capital management and valuation of assets and
liabilities – as part of the interim reporting.
5.2
Detailed application of the Guidelines on qualitative reporting to syndicates
5.2.1
Each syndicate shall be required to make a qualitative submission as at 31 December 2014 as part
of its Pillar 3 interim reporting as at that date to Lloyd’s.
5.2.2
The submission must address each of Guidelines 21 to 32 (excluding Guideline 26) as set out in
EIOPA’s Guidelines on Submission of Information to National Competent Authorities.
5.2.3
The objective of the interim qualitative information is to provide the supervisor with information on the
insurer’s system of governance, capital management and valuation of assets and liabilities. The
supervisor is interested in knowing the particular circumstances of each insurer in this respect. This
is explained further in paragraph 5.14 of the PRA’s SS4/13, repeated below:
‘The guidelines … include information about the areas relating to the system of governance for firms
and groups and capital management, in particular information on own funds and valuation for
solvency purposes. The PRA expects firms to include information at a point in time, related to the
submission reference date. Firms are also encouraged, where relevant, to indicate where further
development is expected as part of the firm’s preparations for compliance with Solvency II. The PRA
is willing to engage with firms to discuss how the firm’s developing Solvency II work in this area may
be used to meet current regulatory requirements, or support work being done in ICAS+ or IMAP
during the preparatory phase to reduce any potential for duplication.’
5.2.4
For syndicates, the qualitative information should be prepared in accordance with the Guidance
below. The Guidance tailors the requirements to Lloyd’s syndicates – there will be certain Guidelines
which do not or are unlikely to apply to syndicates.
5.2.5
As noted above, the interim qualitative reporting covers system of governance, capital management
and valuation of assets and liabilities.
5.2.6
System of governance (Guidelines 21 to 25 and 37) – it is expected that this material will already
have been prepared and maintained by managing agents as part of their compliance with the Pillar 2
requirements in respect of system of governance. It is not expected that agents will need to prepare
‘new’ material specifically for this purpose however it should be updated to show the status, eg
organisation chart, as at 31 December 2014.
5.2.7
Capital management (Guideline 28) – this covers details regarding the own funds of the syndicate.
This will generally always be Tier 1 basic own funds and explanatory information is only required if
this is not the case.
5.2.8
Valuation of assets and liabilities (Guidelines 29 to 32) – some of these requirements relate to the
Solvency II valuation rules provided by Lloyd’s which are common to all syndicates. These are thus
addressed at Lloyd’s level and do not need to be reported at syndicate level. However some of the
49
approaches, particularly regarding technical provisions, will be syndicate specific and analysis is
required as described under each Guideline, below.
5.2.9
The submission of the qualitative information to Lloyd’s shall be made on a freeform document which
should be submitted to Lloyd’s in PDF format as part of the Pillar 3 interim reporting i.e. as an
attachment in ASR990.
5.2.10 The document should set out each Guideline as a heading. For each Guideline, there should be a
brief description of how the requirements are covered. As set out in the detail below, most of the
Guidelines will be covered by existing documentation maintained by the managing agent. Thus in
this circumstance the explanation should reference the relevant supporting documents which should
also be provided within the PDF file.
5.2.11 For managing agents which manage more than one syndicate, it is possible that elements of the
qualitative submission may be identical across two or more syndicates. However, to facilitate review
purposes, it is necessary for each syndicate’s submission to ‘stand alone’ in this respect, ie the
elements of the submission common to more than one syndicate must be provided in each
syndicate’s submission.
5.2.12 The qualitative disclosures must be reported on by the managing agent in the ASR910; the wording
of this report reflects this.
50
Guideline 21: General governance requirements
Requirement (1.72)
a) Information allowing the national
competent authority to gain a good
understanding of the system of
governance within the undertaking, and
to assess its appropriateness to the
undertaking’s business strategy and
operations.
Article 41 (1) of the Solvency II Directive requires that:
‘Member States shall require all insurance and reinsurance
undertakings to have in place an effective system of
governance which provides for sound and prudent
management of the business. That system shall at least
include an adequate transparent organisational structure with
a clear allocation and appropriate segregation of
responsibilities and an effective system for ensuring the
transmission of information. It shall include compliance with
the requirements laid down in Articles 42 to 49.
The system of governance shall be subject to regular internal
review.’
This should already be the subject of documentation and
review, and Lloyd’s would expect agents to be able to provide
the following as evidence of their governance framework:
• Organisational structure showing accountability – i.e. board,
committees, decision making bodies and required functions
(actuarial, internal audit, compliance, risk management)
• Personnel organisation structure / function organisational
charts – i.e. resources
• Matters for the board including delegation to committees /
decision making bodies
• Terms of reference for the board and each committee /
decision making body including Committee membership (with
job title of the individual members)
• Board and committee timetable – detailing dates and outline
of agenda / matters to be discussed
• Management information (MI) – summary details of the MI
provided to the Board, committees and decision making
bodies.
The governance framework should clearly demonstrate
where the following activities are being considered and
decisions made:
• Underwriting
• Reinsurance
• Claims
• Reserving
• Investment management
51
Requirement (1.72)
• Asset liability management
• Liquidity and concentration management
• Operational risk
b) information relating to the undertaking's
delegation of responsibilities, reporting
lines and allocation of functions.
These requirements should be addressed in respect of each
committee, decision making body and required functions
(actuarial, internal audit, compliance, risk management). This
should have already been documented by the managing
agent as part of its system of governance.
c) The structure of the undertaking’s
administrative, management or
supervisory body, providing a description
of their main roles and responsibilities
and a brief description of the segregation
of responsibilities within these bodies, in
particular whether relevant committees
exist within them, as well as a description
of the main roles and responsibilities of
key functions held by such bodies.
An organisational structure should be provided showing
accountability – ie board, committees, decision making
bodies and required functions (actuarial, internal audit,
compliance, risk management).
Guideline 22: Fit and proper requirements
Requirement (1.73)
a) a list of the persons in the undertaking,
or external to the undertaking in the case
that the undertaking has outsourced key
functions that are responsible for key
functions.
This is self explanatory and should include those persons in
post as at the reporting date.
b) information on the policies and
processes established by the
undertaking to ensure that those persons
are fit and proper.
‘Fit and proper’ policies and procedures should be in place for
directors, senior staff and those holding key functions. Under
Solvency II key functions are those considered critical or
important in the system of governance and include at least
the risk management, compliance, internal audit and actuarial
functions. Other functions may be considered key functions
according to the nature, scale and complexity of the business
or the way it is organised.
The following may be regarded as evidence of procedures to
ensure the adequacy of skills and experience:

Fit and Proper Policy

Recruitment procedures

Performance review/appraisal process

Board evaluation process – including review and
52
Requirement (1.73)
mitigation

Training and CPD.
Guideline 23: Risk management system
Requirement (1.74)
a) A description of the undertaking’s risk
management system comprising
strategies, processes and reporting
procedures, and how it is able to
effectively identify, measure, monitor,
manage and report, on a continuous
basis, the risks on an individual and
aggregated level, to which the
undertaking is or could be exposed.
Article 41 (3) states that ‘Insurance and reinsurance
undertakings shall have written policies in relation to at least
risk management….’
The risk-management system shall cover at least the
following areas:
(a) underwriting and reserving;
(b) asset–liability management;
(c) investment, in particular derivatives and similar
commitments;
(d) liquidity and concentration risk management;
(e) operational risk management;
(f) reinsurance and other risk-mitigation techniques.
Thus the managing agent should already have documentation
in place which meets this requirement, notably a Risk
Management Framework or Policy document.
b) A description of how the risk
management system including the risk
management function are implemented
and integrated into the organisational
structure and decisionmaking processes
of the undertaking.
c) Information on the undertaking’s risk
management strategies, objectives,
processes and reporting procedures for
each category of risk, with an
explanation how these are documented,
monitored and enforced.
This simply covers documentation of the risk management
function and how it fits into the organisational and operational
structure of the managing agent.
relation to this:


This is simply the documentation setting out, for each
category of risk, risk appetite and toleration, processes to
monitor and control risk, reporting of actual outcomes and
breaches against tolerances, and processes for taking
remedial action to bring the risk back to within tolerance. This
includes explaining the governance process, including
responsibility for decision making, reporting lines and
oversight.
relation to this:
53
Requirement (1.74)
d) Information on how the undertaking fulfils
its obligation related to the 'prudent
person principle' as set out in the
Guidelines 22 to 30 on the System of
Governance.


The ‘prudent person principle’ is set out in Article 131 of the
Solvency II Directive. The managing agent should have a
written investment policy which should demonstrate how the
agent complies with these requirements.
A managing agent must define its investment policy in line
with what a competent, prudent and expert manager would
apply in order to pursue the chosen investment strategy.
The investment policy must:
• Take into account the syndicate's business, its overall risk
tolerance levels, long-term risk versus performance
requirements, its solvency position and its gross and net
underlying asset exposures.
• If an agent uses derivative products or investment
instruments with the characteristics of derivatives, its
investment policy must take into account their purpose in the
portfolio, their contribution to efficient portfolio management,
the procedures in place to evaluate their suitability for
purpose and the risk management principles applied.
• Consider how to prudently manage liquidity risk in the short,
medium and long term, taking into account investment
strategy, underwriting strategy and claims management
strategy
• Include quantitative limits on assets or exposures, including
off-balance sheet exposures.
• Include special management, monitoring and control
procedures, in particular in relation to investments not
quoted in a market and to complex structured products.
e) Information on how the undertaking
verifies the appropriateness of credit
assessments institutions including how
and the extent to which credit
assessments institutions are used.
An agent’s risk management framework must be capable of
identifying, mitigating and measuring credit risk, according to
internally defined limits.
Credit ratings should be monitored and probabilities of default
evaluated, including for unrated exposures.
Exposure to speculative assets should be limited and
syndicates with significant exposure to assets bearing credit
risk should be capable of hedging that exposure.
The agent should have written policies, as part of their Risk
Management System, which set out which external ratings
agents are used to assist the agent in this function, the extent
54
Requirement (1.74)
to which reliance is place upon them, including whether their
assessments are compared against internal assessments of
the credit rating.
Guideline 24: Internal control system
Requirement (1.75)
a) A description of the undertaking’s
internal control system.
A managing agent’s internal control system must secure its
compliance with applicable laws, regulations and
administrative processes and the effectiveness and efficiency
of operations in view of its objectives, as well as the
availability and reliability of financial and non-financial
information.
The managing agent must have in place a suitable control
environment, appropriate control activities, effective
information and communication procedures and adequate
monitoring mechanisms.
The agent should already have documented this, most likely
through an Internal Control Policy and should provide this
information in response to this requirement.
b) Information on the key procedures that
the internal control system includes.
This is documentation of the key processes that the agent
operates within its internal control system. This is likely to be
documented within an Internal Control Policy or broader Risk
Management Framework documentation.
c) A description of how the compliance
function is implemented.
Agents may provide the following as evidence of the role and
operation of their compliance function:
• Terms of reference / framework detailing the operation of
the compliance function within the business eg unfettered
access, reporting structure.
• Compliance plan – this should detail the timetable of
compliance activities undertaken by the function on a “risk
based” approach
• Compliance report to Board – should include report on
compliance with laws, regulations and administrative
provisions from regulators (including Lloyd’s) and possible
impact of changes in the legal environment and the
assessment of compliance risk.
55
Guideline 25: Additional information on system of governance
Requirement (1.76)
Any other material information regarding the
insurance and reinsurance undertaking’s
system of governance.
It is not expected that anything is reported here.
Guideline 26: System of governance – groups (not applicable)
Guideline 27: Governance structure
Requirement (1.79)
An organisational chart indicating the
positions of key function holders.
This is self explanatory. ‘Key functions’ include at least the
risk management, compliance, internal audit and actuarial
functions.
Guideline 28: Own funds
1.80 (a) A quantitative and qualitative
between equity as shown in the undertaking’s
financial statements and the excess of
assets over liabilities as calculated for
solvency purposes.
1.80 (b) Information on the structure, amount
and quality of basic own funds and ancillary
own funds.
For a syndicate, the excess of assets over liabilities, ie the
amount attributable to members including funds in syndicate
(FIS) will be Tier 1 basic own funds.
The agent should provide a short narrative explanation as to
the movement in equity, summarising these differences.
This will be the same for every syndicate and thus the
syndicate is not required to state this in this submission.
If this is not the case, an explanation as to why the own funds
do not meet this criteria, setting out which tiering they are
assigned to and quantifying the amounts should be provided.
1.81 (a) How the group’s own funds have
been calculated net of any intragroup
transactions, including intragroup
transactions with undertakings of other
financial sectors.
1.81 (b) The nature of the restrictions to the
transferability and fungibility of own funds in
the related undertakings, if any.
56
Guideline 29: Valuation of assets
Requirement (1.82)
a) Separately for each material class of
assets, the value of the assets as well as
a description of the bases, methods and
main assumptions used for valuation for
solvency purposes.
b) Separately for each material class of
assets, a quantitative and qualitative
assumptions used by the undertaking for
the valuation for solvency purposes and
those used for their valuation in financial
statements.
Guideline 30: Valuation of technical provisions
1.83 (a) Separately for each material line of
business the value of technical provisions,
including the amount of the best estimate
and the risk margin, as well as a description
of the bases, methods and main
assumptions used for their valuation for
solvency purposes.
Solvency II classes of business) should be provided. If the
syndicate’s ‘material lines of business’ are the same as the
Solvency II classes of business then this should be
referenced in the narrative, and a reference made to the
ASR240 disclosures which in this case would not need to be
repeated here.
understanding this.
1.83 (b) A description of the level of
uncertainty associated with the amount of
technical provisions.
This should be sourced from existing material prepared by
the agent for instance in provision to the Board when
approving the level of technical provisions.
1.83 (c) Separately for each material line of
business, a quantitative and qualitative
57
assumptions used by the undertaking for the
valuation for solvency purposes and those
used for their valuation in financial
statements.
Solvency II classes of business) should be provided.
1.83 (d) A description of the recoverables
from reinsurance contracts and special
purpose vehicles.
This is a quantification of amounts recoverable (separately)
from reinsurance contracts and special purpose vehicles by
material line of business consistent with the quantitative
analysis provided to address the above requirements.
1.84 Details of the relevant actuarial
methodologies and assumptions used in the
calculation of the technical provisions
including details of any simplification used in
the calculation of the technical provision,
including deriving the risk margin and its
allocation to the single lines of business and
including a justification that the method
chosen is proportionate to the nature, scale
and complexity of risks.
The agent should provide a description of the approaches
used eg chain ladder, Bornhuetter Ferguson etc, calculation
of ENIDs (binary events) etc. This should be capable of
being sourced from the agent’s existing procedures for the
calculation of Solvency II technical provisions and/or the
information contained in the actuarial function report. This
must be provided by material line of business (ie consistent
with Requirement 1.83).
understanding this.
Guideline 31: Valuation of other liabilities
Requirement (1.85)
(a) Separately for each material class of
other liabilities the value of other
liabilities as well as a description of the
bases, methods and main assumptions
used for their valuation for solvency
purposes.
(b) Separately for each material class of
other liabilities, a quantitative and
qualitative explanation of any material
differences with the valuation bases,
methods and main assumptions used by
the undertaking for the valuation for
solvency purposes and those used for
their valuation in financial statements.
58
Guideline 32: Other information relating to valuation of assets and liabilities
Requirement (1.86 to 1.88)
1.86 Any other material information regarding
the insurance and reinsurance undertaking’s
valuation of assets and liabilities for solvency
purposes.
It is not expected that anything shall be reported in respect of
this item.
1.87 A description of:
Managing agents should explain the future management
actions assumed in their determination of technical provisions
and capital. This may include, for example, the future
purchase of reinsurance or future changes to the business
profile. Assumptions should be realistic and verifiable based
on historical experience or current business practice and
strategy.
a) the relevant assumptions about future
management actions, and
b) the relevant assumptions about
policyholders’ behaviour.
‘Policyholders’ behaviour’ typically applies with respect to
investment-linked life insurance products which are not
underwritten at Lloyd’s and is thus not applicable.
1.88 In cases where mark to model
techniques are used: information on:
a) identification of the assets and liabilities
to which that valuation approach applies;
b) justification of the use of that valuation
approach for the assets and liabilities
referred to in a);
c) documentation of the assumptions
underlying that valuation approach and;
The managing agent should have written procedures with
respect to the valuation of assets and liabilities under
Solvency II.
These will include asset and liability classes where modelling
techniques are used to quantify the value. This will typically
be in respect of technical provisions (gross and reinsurers’
share) but may include other asset/liability classes.
These written procedures should be provided in response to
this requirement.
d) assessment of the valuation uncertainty
of the assets and liabilities referred to in
a).
59

Annual Solvency Return and Annual Asset Data Instructions

Transcription

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