Luxembourg: Destination: Solvency II

Last Updated: 28 November 2016
Article by Martin Reinhard

Most Read Contributor in Luxembourg, October 2017

It has been almost a year since the entry into force of Solvency II (SII), and the reporting efforts of (re)insurance undertakings and asset managers are finally converging towards business as usual.


In fact, we're not quite ready to say so yet. Here are some reasons why we think that Solvency II reporting's wandering journey isn't quite over yet.

The blurred vision of the look-through approach

The application and reach of the look-through provision are extensive, with (re)-insurance undertakings (IUs) being required to gather exhaustive asset-level information on their positions in collective investment undertakings to determine solvency capital requirement (SCR) figures reliably.

Recent monitoring exercises done to verify the degree to which the look-through (L-T) principle is applied suggest that many IUs are not able to reach a significant coverage of their investments via the L-T. Moreover, even when the principle is applied, there is no homogeneous indication that the L-T is used as well on deeper layers of investments (e.g. funds of funds, derivatives), as is advised by the Regulation. But what's holding IUs back from achieving complete look-through? The answer is a lack of the quality of the data retrieved from asset managers: information gaps, inaccuracies (e.g. CIC, LEI information) and heterogeneity of the data—amongst other things.

Validation controls tightening up

Transparency and quality of investment information are key topics in SII. Information errors translate into higher capital charges and operational costs for (re)insurance undertakings. Consequently, investment funds that fail to provide look-through information on their holdings or don't do so with a sufficient level of granularity and quality will face a severe competitive gap within the SII environment.

Previous reporting rounds have been characterised by supervisory authorities taking a slackened approach towards the validation controls applied to input data sourced from IUs, so as to smoothen the transit of data for the early reports. Along with the ongoing normalisation of the reporting processes, it is expected that validation controls will be tightened up, meaning more responsibility for IUs and, in turn, on asset managers as the prime source of the investment information.

Full speed ahead towards annual reporting

The scope and breadth of annual reporting is palpably larger than quarterly reporting, demanding additional Quantitative Reporting Templates (QRT) and new narrative reports (Solvency and Financial Condition Report and Regular Supervisory Report). Although the preparation of QRTs should not come as a novelty for most IUs, the workload needed to prepare a higher number of templates and comply with the greater level of detail should not be underestimated. This is true especially for those IUs which were exempt from quarterly reporting obligations and will now have to gather detailed item-by-item information to produce the look-through and other asset templates for the first time.

Annual reporting also means that IUs must disclose sensitive company information to the public through the Solvency and Financial Condition Report (SFCR). Given the nature of such information, we foresee that IUs will consider this reporting requirement to be beyond a mere compliance exercise. Feeble reporting performances would convey a misleading message to the ultimate audience of the report, including shareholders, regulators, and competitors.

External audit of Solvency II reporting: a costly dilemma

Although in most member states the opinion of the supervisory authority has been to require external auditing of at least the core elements of SFCR and/or annual QRTs, in other cases the relevant authorities have decided to opt out. Arguably, the practice of external auditing would bring advantages in terms of faithfulness and comparability of the reports, though at the price of raising the costs borne by the industry. Accordingly, the appeal for external audit may have repercussions over the whole reporting process, meaning stricter data quality requirements for asset managers' feeds and further cost opportunity considerations.

Can't rest easy... yet

Both regulatory and industry forces will drive toward some (expectedly) remarkable changes in the approach to Solvency II reporting. In 2017 EIOPA will be expected to re-discuss the methods and assumptions applying to the look-through approach over investments through collective investment undertaking, shedding light on a topic where a lack of specific regulatory indications have left many open questions for IUs and asset managers. The advice will also contain references to the application of risk mitigation technique criteria and to methods for setting up a standardised approach to deriving alternative credit assessments (i.e. avoidance of reliance on external credit ratings). On the other hand, the standardised asset data reporting template (the Tripartite Template, or TPT, promoted by the European Working Group to foster the exchange of SII information from asset managers) is expected to undergo a revision by Q2 2017, covering the latest field taxonomy and regulatory updates (e.g. incorporation of infrastructure investments).

Strategic positioning within Solvency II environment

For IUs, Solvency II calls for an increased awareness of and attention to investment practices. It means introducing additional elements to the traditional value-drivers to assess the convenience of existing and prospective investment decisions. In an environment of low yields and risk-appetite constraints, the presence of embedded capital costs and operational inefficiencies will become even more an element of discrimination within the asset selection process.

Asset managers will have to choose their strategic positioning within this new environment. Whereas non-compliance may represent a deal breaker for IUs targeting full look-through, the level of reach, quality, and consistency of SII information represents a remarkable means to remain competitive and to promote new client mandates.

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.

Events from this Firm
30 Nov 2017, Other, Luxembourg, Luxembourg

We are proud to sponsor this conference on Luxembourg’s global TA & Distribution operations operating model

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

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.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


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.