UK: QIS5 - Too Good an Opportunity to Miss

Last Updated: 15 July 2010
Article by Deloitte Financial Services Group

Most Read Contributor in UK, August 2017

Starting in August 2010, the fifth Quantitative Impact Study (QIS5), where the European Commission tests the proposed calibration of Solvency II, will be conducted.

The Commission hails QIS5 as the last, not-to-be-missed opportunity for European (re)insurers to have their voice heard concerning the design and calibration of Solvency II. They are hoping for a very high degree of participation and the FSA is equally keen for UK insurers to engage in this study.

Firms anticipating seeking internal model approval particularly need to carry out QIS5, in part because they will still need to disclose standard formula calculations for an initial period once Solvency II comes into force, but more importantly for UK firms, because the FSA has indicated that it is a pre-requisite for entry into their internal model approval process.

Insurers are facing two questions with respect to QIS5, namely:

  • How will we organise our participation in QIS5?
  • Are there ways to leverage QIS5 in the context of our Solvency II project, and use it as a step towards compliance? We have dubbed this QIS5+.

Organising your QIS5 participation

As a bare minimum, companies need to perform a number of steps to complete the QIS5 submission. Leveraging year-end processes and existing regulatory reporting, much of the required information can be gathered relatively easily for most jurisdictions.

Experience of previous QIS exercises shows that most firms create a small team, driven by actuaries involved in year-end reporting, to gather the necessary information, perform some additional calculations and complete the template spread sheets. Changes in the requirements have rendered a plain rerun of the QIS4 models impossible, as many adjustments are necessary.

The following steps need to be followed at a minimum:

  • Collect relevant reports from the year-end process, e.g., annual report, liability adequacy test.
  • Gather data to fill in the reporting templates.
  • Gather policy data/model points needed for projections.
  • Determine parameters and assumptions for the models.
  • Review and where necessary adjust existing models from earlier QIS exercises.
  • Perform calculations where existing results are insufficient.
  • Use simplified methods where applicable.
  • Complete and submit templates.

In view of existing workload, smaller firms sometimes find it challenging to squeeze extra work into the diaries of already stretched teams of professionals. Outsourcing QIS5 participation to a service provider is then an option, but in-house teams need to stay closely connected, to achieve the intended learning benefits of participation. Better still, the (re)insurer can free up time for in-house experts by (partly) assigning daily, routine work to junior external staff under their supervision. In-house experts are then freed up to take a leading role in the QIS5 participation, supported by some expert external advice. Deloitte has had good experiences with this kind of 'infusion' approach.

QIS5+: Leveraging your efforts

Participation in QIS5 represents an opportunity from at least two other perspectives. First of all, there is the process by which the QIS5 submission is prepared. The impact study offers an opportunity to design (if it has not been done already) and test the process by which the periodic Solvency reporting will be produced in the future. Secondly, QIS5 can be used to assess the availability and quality of the data needed to feed into actuarial calculations. Let's look at each of these points in detail:

Preparing the submission – process

Many (re)insurance firms view Solvency II compliance as, roughly speaking, being able to repeat the QIS5 simulation within the deadlines imposed by the legislation, at a quarterly or even monthly frequency and in a fully auditable way. Although this does not give due credit to the challenges raised by the second pillar (governance, ORSA), there is some truth in this way of looking at it. Indeed, at a high-level, the process is as follows:

  • policy data needs to be extracted from commercial source systems and to be prepared for uploading into actuarial and risk calculation engines (market value balance sheet, SCR);
  • parameters of a diverse nature (market data, risk characteristics, expenses, etc.) must be specified;
  • actuarial and risk calculations must be performed; and
  • the reporting itself (internal, external) must be produced.

Even from this broad overview of the process, it is clear that many different departments will be involved (IT, Finance, Actuarial/Risk) and that a clear, concise description of the roles and responsibilities of each is mandatory to make the 'close' process a smooth one. We recommend that even before starting QIS5, a process manual is prepared setting out, inter alia, the following information:

  • A detailed listing of all tasks that need to be completed:

- economic balance sheet, per line item/product if necessary;

- SCR for each risk

- available capital;

- reporting templates; and

- qualitative information.

  • Practical steps that need to be performed to complete each of these tasks (data sources, calculation tools, etc.).
  • Roles and responsibilities (who is responsible for preparing, validating, signing off).
  • Anticipated bottle necks, stumbling blocks and mitigating factors.
  • Crucial dependencies impacting the critical path (X is needed before Y can be done, but is itself dependent on Z).
  • Potential (internal) control points and reconciliations

Such a manual can then be tested during the QIS5 process itself and, taking in account lessons learned, can evolve into a reusable document for repeating the exercise in the future.

Clearly stating responsibilities at the outset also enhances awareness of Solvency II throughout the organisation, an important objective of participation in QIS5.


We now turn to the question of data. From an IT perspective, the different steps in the Solvency II value chain can be visualised as follows:

  • Based on the QIS5 data requirements, a 'data dictionary' can be built. That is an overview of all the data elements that need to be fed into the QIS5 calculations, even in the standard model approach. The building of such a dictionary is usually a structuring exercise, since it forces the company to think about the consistent definition of data elements in different source systems.
  • Once data needs are inventoried, one can identify the different information sources available. Depending on the age of the source system, the quality of its content, and its future in the organisation, this readily provides information on the impact of Solvency II on the firm's IT strategy.
  • Once extracted, data will typically need to be transformed before being uploaded into the actuarial and risk calculation engines (for example, translation of policy data into model points). Data quality needs to be assessed at this point, and missing data provided where needed. This latter point is a very delicate one, since it can significantly impact the outcome of the calculations. All this needs to be done by following rigorous, auditable procedures.
  • Actuarial and risk calculations then need to be performed and reports populated. Can your current actuarial engines provide the required output? How will the output be archived for audit purposes? What other, internal management reporting can be generated using this information?


In short, participation in QIS5 offers a host of real life (rather than merely theoretical) opportunities to address Solvency II implementation in advance of the Directive coming into force. It is an opportunity too good to miss to assess your firm's readiness for Solvency II and to design and test some of the processes that you will need to have in place to achieve compliance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.