Insights

On the 29 June 2015, the European Insurance and Occupational Pensions Authority (EIOPA) published a note which emphasised the importance of high quality information being provided to the public and the potential role that external auditors may play in relation to the public disclosures that insurers and reinsurers are required to make under Solvency II.

The public disclosures under Solvency II will be in the format of the Solvency and Financial Condition Report (SFCR) that must contain the information specified by the Solvency II Directive and as further detailed in the Commission Delegated Regulation (EU) 2015/35. The objective of these public disclosures is to provide EU-wide consistent and comparable information to the interested stakeholders about the solvency and financial condition of insurers and reinsurers. However, EIOPA stresses that it is also important that the information is of good quality to permit stakeholders to make informed decisions.

The SFCR has generated a lot of discussion during the past years regarding the possibility of such public disclosures being made subject to external audit and the added burdens this would generate, particularly on smaller undertakings. It was expected that EIOPA would apply a uniform requirement across member states in this regard. However EIOPA has granted discretion to the respective National Supervisory Authority of the member state to determine whether an external audit is required for these disclosures. Certain member states have already declared their position and require an external audit for supervisory reporting and public disclosures.

In its June 2015 note, EIOPA stated that it would monitor closely possible divergent levels of quality in public disclosures across the member states and suggested that certain key elements such as the balance sheet, own funds and capital requirements could fall within the scope of an external audit which would be a powerful tool to ensure high quality of the disclosures.

The Malta Financial Services Authority has not officially declared its position in this regard and it is still not known whether Maltese insurers and reinsurers will be required to subject parts or all of their SFCR to external audit. In view of the imminent implementation of Solvency II, it is anticipated that the MFSA’s decision will be made known in the near future.

The full text of EIOPA’s note can be viewed by clicking here.