TP FAQs 091211

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TP FAQs 091211 Powered By Docstoc
					Topic                       Date
Acquisition costs

                            Apr-11



Acquisition costs



                            May-11




Administration expenses &
overheads
                            May-11


Binary events
                            Apr-11

Binary events
                            Apr-11

Binary events               Jun-11
Binders

                            Apr-11


Calculating TP's


                            Sep-11



Calculating TP's




                            Aug-11




Cat risk



                            Jul-11
Credit risk

                             Jul-11



Currency allocations
                             Apr-11

Currency segmentation of
technical provisions


                             Jul-11




Current position reporting




                             Mar-11




Current position reporting


                             Apr-11



Current position reporting
                             May-11

Current position reporting
                             May-11

Current position reporting




                             May-11




Current position reporting
                             May-11

Discount rates
                             Apr-11

Discount rates

                             May-11
Discounting




                              Sep-11




Discounting tool and
counterparty default helper
tab

                              Jul-11




Expenses




                              May-11




Expenses
                              May-11

Expenses




                              May-11
Expenses




                      Aug-11




GQD


                      Sep-11



GQD




                      Sep-11




GQD and TPD Returns




                      Sep-11




GQD return

                      Jun-11



GQD Return

                      Nov-11
GQD Return

                          Nov-11


Gross acquisition costs
                          May-11

Half Year TPs




                          Aug-11




Half-year TPs             Apr-11
Homogenous risk groups
                          Apr-11

LCA balances and TPs




                          Jun-11




Maintenance of returns

                          Apr-11


MGA business




                          Jun-11
MGA Business




                               Jun-11




Policies not yet incepted or
legally obliged

                               Aug-11



Profit commissions

                               May-11


QIS5 Re-run

                               Aug-11



QIS5 Re-run
                               Aug-11

Reinstatement premiums


                               May-11
Reinsurance Acquisition
Costs




                          May-11




Reporting currencies

                          Jun-11



Reporting query

                          Sep-11



RI premium

                          May-11


Risk margin
                          Apr-11

Risk margin
                          May-11

Risk margin
                          Jun-11

Risk Margin



                          Aug-11
Segmentation

                             Apr-11


Surplus capital (including
FIS)




                             Jul-11




Technical Provisions
TP Data
                             Aug-11

TP Data
                             Aug-11

TP Evidence template




                             Jul-11




TP Evidence template

                             Jul-11



TP Submission


                             Sep-11
TP Template



              Sep-11




TP Template




              Sep-11




TP Template




              Sep-11




TPD




              Nov-11
TPD



                          Nov-11




TPD for life syndicates




                          Oct-11




TPD Instructions




                          Aug-11




TPD Instructions




                          Sep-11




TPD Return

                          Sep-11
TPD Return




             Oct-11




TPD Return




             Nov-11




TPD Return




             Nov-11




TPD Return
             Nov-11
TPD Return - Risk Margin




                           Nov-11




TPD Return: Definitions
                           Jul-11

TPD Return: Expenses




                           Jul-11




TPD Returns



                           Oct-11




TPD: Currency reporting




                           May-11
TPD: Currency reporting




                            May-11




TPD: Currency reporting



                            Jul-11




TPD: Reporting currencies



                            Jun-11




TPs September submission
template
                            Jul-11


Unincepted business
                            Apr-11

Unincepted Premiums


                            Sep-11



UWY                         May-11
Valuation As At Dates




                        Sep-11




Yield Curves
                        Jun-11

Yield Curves




                        Dec-11
                                Question
Within the TP submission (May 2011) can you confirm whether you are
expecting the CP and PP future premium amounts to be gross or net of
acquisition costs? I am assuming gross with the acquisition costs to be
entered in separately into the “Expense provision - Gross Acquisition Costs”
field at the top of the submission?
Why does the Technical Provisions proforma add back the acquisition costs
for both Gross and RI in cell D11 for the “Total Net Best Estimate Technical
Provisions”? The best estimate claims and premium provisions are
included net of these acquisition costs as would expect given the “best
estimate cashflows” approach. By adding the acquisition costs back, it
would suggest that the total TPs in D11 will be overstated and not on a best
estimate cashflow approach.
Most of our expenses are included in the unallocated claims provision.
Could you advise what you are expecting to see in these fields?


How does Lloyd's anticipate agents dealing with binary events?

Will Lloyd's be able to provide loss distributions to agents for use in
calculating binary events?
Is it necessary to separate the calculation for binary events?
Can Lloyd's provide any further guidance on the treatment for binders?



Please can you clarify whether when Solvency II is 'live' Syndicates will be
required to calculate technical provisions on a quarterly basis (i.e. more
frequently than annual) and if so what the valuation date would be at the
interim quarters (e.g. following year-end or as at 'now'). Please can you
convey your understanding of what is required for the FSA / EIOPA as well.

The specification for the Half-Year and Projected Year-End Technical
Provisions shows a requirement for a risk margin calculation. As we are not
conducting a full QIS5 exercise this time, we do not have the full SCR
needed to calculate the risk margin.

 The recent guidance (technical provisions submission template
instructions) on page 5 says risk margins should be calculated by applying a
cost of capital to the technical provisions. Is there any further guidance on
how this should be applied ? Is this simply applying the cost of capital
percentage to the calculated net technical provisions and if so, do we still
assume a cost of capital rate of 6% ?




We have a treaty excess of loss PA book. Is there anywhere in the QIS5
standard formula where we should be calculating a cat risk for this book? At
the moment it is not included in any of the catastrophe calculations because
there is nowhere that seems appropriate, and it is specifically excluded from
the Cat Health module.
We have a credit / political risk excess of loss treaty book. At the moment
we are calculating the credit risk within method 2 "credit" based on a straight
application of 139% Ct factor to the premium whether it is pro rata or excess
of loss. Should we be altering the calculation in any way to allow for the
excess of loss treaties?
Does the suggested 5% threshold on materiality relate to class by class or
the overall syndicate?
The guidance for the Half Year and Year End Projection of Technical
Provisions states that the six plus one currencies are now required – this is
a change from the previous submission. However, in the TPD guidance, it
states that we can include any non-material currency within one of the
specified currency buckets provided non-materiality has been pre-agreed
with Lloyd’s. Does the TPD approach apply to the technical provisions
submissions? Also, what is the process, timescale and format required for
pre-agreement?
On the TP form we have to submit in May there are a few columns for the
current position (of premiums, paid claims and outstandings). Taking
premiums as an example, there would be two possible ways we could fill
this in: The usual understanding of the current i.e. signed premium, or: The
actual cash received. I’m assuming that as this is a SII form we should be
submitting the latter – i.e. the actual cash received. Otherwise there would
be a mis-match with the technical provisions which are the discounted
future cashflows. Please could you let me know whether my thinking is
correct or not?
Within the TP submission (May 2011) the following fields are asked for:
Current position (Gross) Claims paid and incurred, Premiums received, net
of acquisition costs. Can you confirm whether the “paid claims” are total
paid claims as at 31.12.2010 or paid claims during the 2010 calendar year.
Similarly are the “premiums received” the total received or just those
received during the 2010 calendar year?
For the reporting of the gross outstanding claims - we are assuming these
are as reported, i.e. excluding IBNR. Can you please confirm?
With regards to the Technical Provision return due May 27th, could you
please confirm that "Outstanding Claims" under the "Current Position"
section refers to Case Outstanding as opposed to Case+IBNR.
Within the TP submission (May 2011) the following fields are asked for:

Current position (Gross)
• Claims paid and incurred
• Premiums received, net of acquisition costs

Can you confirm whether the “paid claims” are total paid claims as at
31.12.2010 or paid claims during the 2010 calendar year. Similarly are the
“premiums received” the total received or just those received during the
2010 calendar year.

Can the column for the current position of "Premiums received" also use
signed premiums?

Will EIOPA produce mid-year risk calculation rates? What numbers should
be used for projected TPs on 31/12/11?
Which spot rates are agents meant to use? I know we normally take the
spot rate plus the liquidity premium x 50%. But, what spot rate do we use?
Is it 2010 Pre-Stress Curve or 2010 Baseline Stress Curve? I am assuming
it is neither the Adverse or Inflation Stress curves.
The discounting model provided by the regulator for 2009Q4 & 2010Q4
technical provisioning discounts in whole years.

 We thought it might be more appropriate to assume cash flows fall on
average in the middle of the calendar year. However, using spot rates
based on year-end maturities mean this approach is not 100% accurate as
the spot rates should be ½ yearly. Please could you provide your thoughts
on this prior to us finalising our figures for the 30th September submission.




Are there updates available for the Discounting Tool and the Counterparty
Default helper Tab Tool published by CEIOPS for the QIS5 exercise for
revised exchange rates, T1 exposures and yield curves?




There are a number of splits of expenses on the May submission. These
are not defined anywhere, and it’s not clear why they are split this way – can
you clarify?




With respect to the expense provisions , we assume that these will be as at
year end 2010. Again, I'd be grateful if you could please confirm?
We have a ULAE expense provision at the period end in our accounts. This
is the only expense provision we have at the period end and under a S.II
basis. I am planning on splitting this into the various categories (unallocated
claims handling, admin expenses, overheads, and other lines) and
discounting this to the present value. Am I right in thinking this is an
appropriate method to use? The finance and actuarial teams want to check
we're not missing anything.
I was hoping to clarify a query with respect to the expenses breakdown for
the technical provisions submission. From the most recent June 2011
submission template instructions, expense provisions are now required at a
line of business level by year of account with the number of categories
reduced to four. This is clearly less granular than the May submission. Do
you believe that this less granular level will remain going forward, or is it
more worthwhile to produce a more detailed breakdown for future purposes,
doing a summation for the November submission?


We have been looking out for the GQD homepage on the CMR (with our
Administrators) and have not been able to locate it. Could you please let me
know when this is expected to be up and running? If it already is - can you
please confirm that we have access?


Could I confirm that the GQD will contain the movement in the quarter for
signed premium and paid claims, and the as at position for claims
outstanding at the end of the quarter.

For the first submission on 30th November, do you require the Q3
movement, or the year to date movement?




Would it be possible to get some indication of the timelines agents will be
expected to work to for submission of the quarterly GQD and annual TPD
returns?




For the first GQD return , either the UAT as at June or the Live one as at
September, should the data be cumulative for the 2011 calendar year. This
would then tie up with the cumulative 2010 data we have agreed. Or should
the return be incremental for that quarter.

I have a question regarding sign off of the GQD return for Q3. Will Lloyds
require a physically signed copy of sign off form 910 to accompany the Q3
submission later this month?
Does the GQD return require Board sign off?



I assume this is brokerage on the inward premiums accrued in the technical
provisions. Which means such premium is shown including brokerage. Is
this correct?
What is the purpose of the half year TP calculations and how does this fit
with a one-year SCR which would cross multiple underwriting years and be
inconsistent with the annual venture of Lloyd's syndicates.




Will agents be required to calculate half-year technical provisions?
Has anything been carried out centrally regarding the justification of
homogenous risk groups?
In respect of LCA balances (in particular those in respect of gross premiums
receivable), please could you provide some further advice on how these
should be treated in the Solvency II balance sheet. Technically, these could
be considered as future premium cashflow and therefore transferred to
technical provisions. Alternatively they could be treated as a cash
equivalent as they are technically a “promise to pay” once signed through
the LCA. The guidance for technical provisions states “that future premiums
should only be included to the extent that any associated liabilities are also
included in the technical provisions”. As signed premiums are generally
viewed to be the equivalent of cash for reserving purposes, I would like
some guidance as to what element should be transferred (if any) to
technical provisions.”
How are agents expected to maintain numbers for all the different returns
required?


In discussions on legal obligation there has been a lot of talk about
cancellation clauses on MGA business (i.e. “contracts to bind”). In principle,
insurers should only allow for legally obliged future business written in the
period up to when the insurer can activate the cancellation clause. For
example, if the insurer is producing a Solvency II balance sheet as at
31/12/2010, and they are legally obliged on a contract to bind starting
1/1/2011 with a 3 month cancellation clause, then they would be legally
obliged on the business they expect the MGA to write up to 31/3/2011.Two
questions of clarification arise:
i) It would seem sensible and consistent that the same principles apply to
“contracts to bind” that have already incepted. For example, in the above, if
the contract to bind had incepted on 1/12/2010, then the insurer should still
exclude business written by the MGA after 31/3/2011. Should insurers apply
the same principles to “contracts to bind” that have already incepted?

ii) The ability to activate a cancellation clause often depends on whether an
insurer is the lead or following. At inception of a “contract to bind” most
insurer’s will be anticipating that the business will be profitable. Under the
above example, follow insurers would be able to anticipate profits on the
whole contract to bind, whereas the lead would only be able to anticipate
profits on 3 months’ worth. That seems illogical, particularly given that the
cancellation clause would (in most cases) only be used if the business was
proving to be unprofitable. Is there a recommended approach emerging?


Can I double check the treatment of ceded premiums covering policies not
yet incepted or legally obliged. Correspondence would suggest that if we are
not talking credit for such reinsurance on the claims side we should not be
including its costs. Are you saying that irrespective of this you allowed for
the full ceded not yet due in the technical provisions?

In the column for Future Premiums Included in Gross Best Estimate exc
Expenses and Exc Discounting, if we have a profit commission due to pay
out in the future can you please confirm the sign that it should take?

  The control check Cell M on the valuation tab is reading “False”. We are
comfortable that the totals are correct and that the movements shown
reconcile and as such don’t believe the control check to be working. It
doesn’t appear to be driven by decimal points but we are wondering if this is
caused by the basic own funds being negative?
Where within the valuation tab do we include the FAL invested assets? We
have included the FAL LOC’s in cell K173 and are currently including the
invested assets in K174.
With regard to reinstatement premiums for outwards reinsurance on earned
business, should these go in the claims provision? (with reinstatement
premiums anticipated for the unearned business going in the premium
provision)? I ask because the last line on page 41 of the March 2011 update
guidance on TPs suggests this is not the case, although it seems the most
logical thing to do.
We have been looking into the data requirements of r/i acquisition costs
and we have not captured the data relating to commissions paid to the
brokers who place the reinsurance on our behalf. Our systems do have the
data relating to the ceding commissions we receive, but not the
commissions
paid to brokers.

We are looking into the system changes required in order to capture this
data going forward. However, trying to recreate the data historically is
not really feasible given the volume of contracts involved.

I'm also still not sure how this information will be used. On inwards
business, we receive a premium gross of acquisition costs, which is an
inwards cashflow. We also pay commission to brokers which is an outwards
cashflow. When it comes to outwards business, we pay a r/i premium gross
of commission. This is an outwards cashflow. If we recorded the amount of
commission paid, this would also be reported an outwards cashflow and it
has already reported as part of the premium. Is there a specific reason
for asking for this information?




Can Lloyd's clarify currency reporting requirements and consistency
between these - TPs require 6 plus 1 but latest balance sheet request is
asking for 5 plus 1.


Is there a list as to what reporting falls under the category of “S2 reports”?




For the current return do we add un-requested RI premium creditors to the
reserves?


Does the risk margin need to be calculated outside the model?

Are you expecting the risk margin to be included in this return?


Can Lloyd's provide and further guidance on the use of simplification
method 3?
Will there be a prescribed basis or a choice of method by agents when
considering the Risk margin for the Standard Formula or Internal Model?
TPs requirements state that segmentation should be calculated by country
rather than by currencies - will this be challenged on the grounds of data
issues?

Should surplus capital (including FIS) in the openning balance sheet be
included in the SCR calculation?




Can the 6+1 basis for calculating currency risk by altered in the future?

How much of Binders (on a 1 year basis) should be included in TPs?


On the Valuation Process tab under "Justification of selected valuation
methods" please can you provide some further guidance on what is meant
by "Whether cash flows are materially path dependent (eg cash flows
depend on economic conditions at the cashflow date and also economic
conditions at previous dates)"




On the Valuation Process tab under "Justification of selected valuation
methods" please can you provide some further guidance on what is meant
by "Existence of material non-linear inter-dependencies between drivers of
uncertainty (eg onset of a recession which could increase frequency or
severity of non-life claims)"
Should agents be using the 'Period End' or 'Average' exchange rates for the
half year and full year TP submission?
With respect to the Half year and Full year projected TPs, we have sought
to automate our population of the sheets. Whilst undertaking the review we
have noted one discrepancy within the sheet. For Life RI (CoB 35) there
appears to be a line missing underneath line 1898. There should be a line
reading "LO_D". Can you please confirm if this is what you would expect?
Any if not, do you anticipate re-issuing the sheet?


I have noticed a possible issue in the technical provisions submission
template due on 30 September 2011. This is relating to the RI acquisition
costs
In the template the RI acquisition costs are in blue (information only) in AK,
using the GBP section as my example. The RI future premiums in column
AE are required to be gross of commission.

The TPs including expenses in columns AL and AP should take the items
excluding expenses (columns AA and AD, respectively) and then add on the
expense items. Three expense columns are added to the gross TPs (AL
includes AH:AJ), which includes gross commission. But RI acquisition costs
in column AK aren’t added into the RI TPs and therefore are missed out.
Given both gross and RI future premiums are gross of commission, I would
expect the commission items to be included as expenses for both.
What should I do about this? I can enter RI future premium net of
commission and leave column AK blank, to give correct total TPs, but this
would then not give expenses representing all items required.




For the purpose of Friday 30th September's technical provisions template
submission, do you have any guidance as to what set of interest rates you
expect agents to use to discount the business falling into the “Other”
currency bucket (i.e. not one of the 6 named currencies)?



1.    When will the TPD become “live” on CMR enabling a working
template to be downloaded?

2.     Gross claims relating to the Japanese earthquake and tsunami are
settled mainly in GBP although the original currency will be JPY. As the
original currency is JPY then the gross claims relating to this loss will be
denominated in JPY within the TPD. Reinsurance recoveries will be
collected from reinsurers in the currency in which the gross claim was paid –
i.e. mainly GBP. For the purposes of the TPD I presume we show these
recoveries in GBP even though they relate to gross claims originally
denominated in JPY. Thus there will be an inherent currency mismatch
within the TPD.
Can you please clarify the currencies to be used in TPD to 31.12.10. FAQ 1
states that the 6 currencies should be stated in original currencies ( not
original currencies in converted £), Other than ‘other’ which should be stated
in C£.
This is a different concept from the SRD so I want to make sure that my
understanding is correct.


Could you please confirm that the TPD for a life syndicate should be
prepared on the same basis than the September submission i.e. “life
syndicates should report all business within the claims provision section,
with the exception of unincepted business relating to the 2010 and 2011
underwriting years which should be reported in the premium provision
section.”




Are you saying that the TPD instruction supersede those published on page
24 of the March 2011 publication "Technical Provisions Under Solvency II
Detailed Guidance"?




In respect of the TPD submission due 30 November 2011.
Schedules 598 and 599 do not have a column for claims provisions – future
premium cash flows.

The TP guidance (march 2011) states

 “In a change to previous guidance, Lloyd’s current interpretation is that
premiums relating to claims that have already occurred should now be
incorporated into the calculation of
outstanding claims provisions. Note that this is based on Lloyd’s current
understanding and this could still change
before implementing measures are finalised.”

Will you be updating the TPD return to allow the reporting of this cash flow?

Are you going to prescribe through which column these cash flows should
be reported or is it for each managing agent to decide?


Please could you advise when the CSV file templates and off-line validation
will be available for the TPD Return?
With regard to the allocation methodology for the TPD, the May 2011
guidance states that “Lloyd’s would expect agents to document their
proposed allocation approaches which will be reviewed in advance of the
TPD submission in November”.

Is their a formal requirement to submit this methodology and if so, by what
date, and is there any prescribed content / format ? Or, is this only required
if it differs significantly from the proposed approaches in the guidance ?




I am unable to submit data for the 2011 YOA in the 2010 year-end TPD
return due for submission on 30th November 2011, how should this data be
reported?




Lloyd's has advised that the TPD return should be consistent with the May
TP submission. Are you expecting the numbers to be exactly the same? We
progressed our methodology since the May submission and we were
planning to submit updated numbers for the TPD returns. Could you please
confirm if we should submit the numbers as per May submission or our
updated (and more accurate) numbers?

Does the TPD return require Board sign off?
Question re the Risk Margin figures to submit in TPD form 699:

What is meant by an undiscounted risk margin?

 I thought the Risk Margin, using a cost of capital approach, was the cost of
providing an amount of eligible own funds equal to the Solvency Capital
Requirement (SCR) necessary to support the obligations over their lifetime.
Hence not a cashflow, and therefore no undiscounted or discounted value.

 Is it the interpretation that the Undiscounted Risk Margin is notionally equal
to the Sum of ( the future SCRs multiplied by the cost of capital), before
discounting by the risk free rate? And then the actual Risk Margin is the
difference the Undiscounted Risk Margin and the Risk Margin Discount?


The definitions in TPD 598 are 'TBC'. Do you know when the definitions are
expected to be provided?
In TPD 199 Revenue Items, there is a field for non-ULAE 'Gross Claims
Management Costs Other Expenses'. Can you explain what this item relates
to and could we have some examples of the costs that you would expect to
sit in here to ensure that allocate our expenses appropriately?




Where are reinsurer default losses included in the TPD return? They are not
mentioned in the specifications. I am including them in the reinsurance
recoveries (i.e. I’m decreasing reinsurance recoveries for the reinsurer
default charges) for now.



For reporting in the TPD, how do we decide and justify which currencies are
immaterial and do not need to be reported separately?
Do we need to report by settlement or original currency?




Given the nature of our business and our interpretation of the Technical
Provision and TPD guidance it looks as if the Technical Provisions should
be calculated on a settlement currency basis and the TPD returns should be
submitted on an original currency basis. Do you therefore expecting to see
differences in the TPDs and the Technical provision submissions simply as
a result of different allocation to currencies?


Assuming an agent addresses the issue of materiality at syndicate level
satisfactorily for its currency splits, are there any Lloyd's related
considerations that also apply? For example, the syndicate TPs total £50m
and gross assets are £60m and the actuarial and finance functions conclude
that the US$1m element of both is immaterial, will Lloyd's accept this and
enable the agent to report the US$ elements within the "plus one" category?


Which version of the TP template should I use for the September
submission and what changes have been made to the template?


Most agents are using method 2 to calculate unincepted business - are
Lloyd's able to mandate the method?

Please could you confirm whether Unincepted Premiums to be entered on
SBF schedule 105 should include unincepted premiums in respect of both
the 2011 and 2012 underwriting years?

We will have unincepted premiums on the 2011 underwriting years relating
to attachments under binding authority agreements. The latter are being
Should the figures be entered by pure underwriting year, or RITC year?
 What will the valuation date be for an interim quarter - e.g. at 31.03.2012
would it be 31.03.2012 or 31.12.2012? (i.e. based on current data and
including all business legally obligated as at 31.03.2012 or based on a
projected year-end data position and all business expected to be legally
obligated as at 31.12.2012?)

Are there any additional requirements from the FSA that you are aware of?




When will the yield curves for the mid year technical provisions come out?




I am looking for some yield curves as at 30 September 2011. I know
Lloyd’s published some curves as at 30 June for the recent technical
provisions submission.

Have Lloyd’s published similar yield curves as at 30 September?
                                                     Answer
As we are collecting acquisition cost reserves explicitly at a whole account level we would require that the future
premium amounts are gross of acquisition costs in the claims and premium provisions. This is similar to the
current reporting basis in the SRD where written premiums and UPR are reported gross of acquisition costs and
DAC respectively.

Technical provisions should include provisions for all expected future expenses incurred in running off the
business, this includes the acquisition costs (gross and RI) to be paid in the future. Future premiums in the
body of the template should be entered gross of acquisition costs to avoid any double count in cell D11. All
other expenses should not be included in the claims and premium provisions sections but instead entered in
D14:E20. It is important to ensure that agents are comfortable that they are themselves not double counting in
the submission. How they book and account for the different forms of RI acquisition costs will determine
whether a positive or negative value needs to go in to row 16.
Solvency II requires that expenses cover all expected future expenses incurred in running off the business
which are expected to be greater than the current basis, ULAE will cover part of these expenses but not all.
Items such as marketing, rent and utilities etc should be included which may not have previously been reported
under ULAE.
No specific method has been stipulated for binary events - this is subjective area. Lloyd's can demonstrate their
own approach to binary events but cannot be more prescriptive than this.
Lloyd's avoids mandating methods as loss distributions may not suit all agents - the LMA may provide preferred
approaches.
It is only necessary to identify the amount for binary events.
This is an area that has yet to be decided on industry-wide: the FSA have a separate view to Lloyd's and the
regulators have yet to settle on an interpretation. Lloyd's will provide more guidance on this when the
information becomes available. Lloyd's expects to mandate an approach once the industry debate has reached
a conclusion.
Under Solvency II, technical provisions will need to be reported on a quarterly basis. Solvency II allows
estimations during the quarterly reporting, hence full actuarial process do not need to be carried out every
quarter. Although not mandatory, Lloyd's would expect syndicates to calculate technical provisions fully twice a
year.


The guidance for the September submission states that "risk margins should be calculated using a cost of
capital approach", this should be applied to a relevant SCR and not to the technical provisions. In most cases
this involves applying the 6% cost of capital rate to SCRs calculated at future time periods and discounting this
with a risk free yield curve. The sum of these discounted 6% of SCRs is then the risk margin.

Agents may use the 2010 Year End QIS5 rerun as a basis for the 2011 Half Year Technical Provision risk
margin if they deem this to be appropriate. Alternatively a mid-year SCR calculation (standard formula or
internal model) may be performed to re-calculate the risk margin amount at half year. For the 2011 Year End
projected position Lloyd's expects Managing Agents to update their SCRs to reflect the expected position as at
2011YE (again this may involve a recalculation of the standard formula or internal model in line with the LCR
submission), the risk margins can then be derived from this using the above methods.




Personal Accident would generally be mapped to a Health Solvency II classes. However, the Health
Catastrophe scenarios do exclude non-proportional business as per 8.101 of the QIS5 technical specification.
However, in order to capture this in catastrophe risk Lloyd's would suggest this be included in this module if
possible. The scenarios require a gross estimate of the losses under each scenario and a corresponding
estimate of their mitigation. Inwards non-proportional health reinsurance will be captured if it is included in the
modelling of the scenarios. However, agents with inwards non-proportional health business may not have the
data to model the average sum assured of the risks in each country.
Generally non-proportional risks should be mapped to one of the 3 non-life non-proportional classes and
modelled in this way for technical provisions and the standard formula SCR. Based on Lloyd's latest
understanding of the guidance Non-Proportional Credit business should be mapped to the non-
proportional property class. This would apply a 250% factor to those gross premium amounts

Settlement currency is fine as long as this is right and corresponds to exposures - needs to be justifiable. We
consider that materiality would be at syndicate level not class of business.
The same approach applies to the September TP submission, i.e. any non-material currency can be included
within one of the specified currency buckets. However, for the September TP submission, we do not require
agents to pre-agree their currency splits with Lloyd's but we would expect the split to be consistent with the
proposed split for the TPD. The approach for pre-agreement on the TPD is that the actuarial function supplies
evidence to Lloyd's at least 30 days in advance of the first TPD submission as to why they believe the proposed
split is appropriate (e.g. if they are suggesting certain currencies are immaterial etc.). There is no
specified format in which agents must supply the evidence - it is up to the agent to supply sufficient evidence.

It is correct that the premium to be reported in the May submission should be the actual cash received, however
Lloyd's will accept signed premium if this is easier to report. If you do take this approach then you should put a
note stating that this is the case.




These should be cumulative amounts up to 2010 Q4 relating back to each original pure year of account.




Yes - these are reported claims only.

Yes, the column for outstanding claims should be just outstanding reported case estimates. Reserves for IBNR
are instead included within the best estimate reserve columns to the right in the template.

These should be cumulative amounts up to 2010 Q4 relating back to each original pure year of account.




For this exercise, signed premiums may be used as an approximation for the amounts of premiums received.
Lloyd's would expect agents to use the comments tab to record any such approximations used.

It is unlikely that EIOPA will produce a risk calculation at half year. Lloyd's will provide half-year information to
agents.
It is the pre-stress curve. In reality this will translate into using the + 50% illiquidity for everything except the
discount on the risk margin that only gets + 0%.
The yield curves provided by EIOPA are at annual intervals (above 1 year) from the valuation date. The
discounting tool does assume that cashflows occur at year end. Assuming cashflows occur at mid-year is an
appropriate assumption and there are several approaches which could be adopted to work around this given the
annual yield curve information provided, Agents may consider:
Assuming the cashflows occur at mid-year and discount using the year end spot rates but give a half year less
of discounting credit (i.e. cashflow at 18 months discounted with year 2 rate but only 18 months of discount);
Assuming the cashflows occur at mid-year and use half yearly yield curves derived by interpolating between the
year end positions (i.e. cashflow at 18 months discounted with an interpolated 18 month discount rate with 18
months of discount);
To derive either of the above Agents would have to amend to formula in the discount tool.



Discounting Tool: Lloyd's will not be publishing an update to the discounting tool for the completion of the QIS5
rerun. The 2010 year end yield curves (which include the spot rates and illiquidity premiums) from EIOPA for
use in the QIS5 rerun are available on lloyds.com, these can be used for discounting where required.

Counterparty Default Tool: Lloyd's has produced a revised version of the Counterparty Default Tool with
revised 2010 year end exchange rates, T1 exposures have not been revised. This is available on lloyds.com
here: insert link


As set out in the final advice to the EC (DOC 33/09), all cashflows arising from expenses incurred in running-off
liabilities should be taken into account in determining the best estimate. The level 2 text states that this should
include (a non-exhaustive list) administrative expenses, investment management expenses, claims
management expenses and acquisition expenses. Our split currently shows ULAE, Gross Acq Costs, RI Acq
Costs, Admin Expenses, Overheads, Investment Management and Other which we feel reflects the
segmentation reasonably well. Lloyd's review of the end-May submission will include ensuring that all agents
can make explicit allowance for these expense types.

Going forwards, these expenses should all be considered in the Solvency II calculation. In addition, the method
used to allocate the overhead expenses by line of business and premium/claims provisions (as per level 2 text)
may mean that the expense types need to be split out and treated differently.
Yes - all figures should be as at 31 December 2010.

Expense provisions under Solvency II need to cover all expected future expenses incurred in running off the
business. ULAE will cover part of these expenses but not all. Expenses that are not included under the current
basis but that will need to be included under Solvency II include, for example, investment management
expenses. Also there will be (in some cases) significant acquisition costs (Gross and RI) on unincepted
business which is not accounted for on the current basis. We would expect expense provisions to increase
under Solvency II compared to the current basis.

Although the CEIOPS (/EIOPA) texts do not give definitions of expense categories, the level 2 text
does categorise these in to "...administrative expenses, investment management expenses, claims
management expenses and acquisition expenses...". Lloyd's is asking for a similar split to try and get comfort
that syndicate TPs include all types of expenses needed. This may not be required at such granularity for future
exercises (though note that the TPD will want a split of provisions for ULAE/non-ULAE/Acquisition costs).
You are right in that the number of categories has reduced and so is less granular in that respect but we now
require expenses to be split at a Class of Business and YOA level (we previously only requested these at
a whole account total level in the May TP submission). The expense categories in the September submission
template are now consistent with the new technical provision return (TPD), that is ULAE, non-ULAE and Gross
& RI Acquisition Costs. The TPD will eventually replace the SRD and this will be the main source of our TP
data. Whilst there are no plans to change the expense categories in the TPD going forward, Solvency II
requires that all expenses incurred in running off the business are included and this may mean we quantify
these more explicitly going forward . We would therefore suggest keeping a flexible approach. The main
requirement is to ensure that you can estimate expense provisions for all existing and legally obliged policies.

The GQD return was released in UAT on 25/07/2011. The (attached) GQD FAQs are also available from the
CMR UAT site.
Agents need to contact the Data Management Helpdesk (ITGApplicationSupport2@lloyds.com) to arrange for
their UAT account to be set up.
The production release of the GQD return is scheduled for the 21st October 2011.

The answer can be found in the FAQs document that was released on Tuesday 26th of September and
currently available from the Core Market Returns UAT environment.

Q7: Should syndicates report the quarterly movement, rather than cumulative to date?

The GQD data required is the quarterly movement (increment) for the Gross Gross Signed Premium, Gross Net
Signed Premium and Gross Claims Paid. Lloyd’s use these figures in addition to the incremental amounts
received in previous quarters’ returns to calculate the cumulative position. The Gross Outstanding Claims figure
should however be reported on an ‘As At’ basis.

Q8: Will the mandatory return in Q3 require data for 2011 Q1 to Q3 to be reported?

No, the GQD return captures quarterly incremental data only. Lloyd’s will continue to receive data feeds from
Xchanging until the GQD return’s go-live date and for a limited time in parallel after that.
GQD submissions in 2012:
Q4 2011: Thursday 12th January
Q1 2012: Thursday 12th April
Q2 2012: Thursday 12th July
Q3 2012: Thursday 11th October

With regards to the TPD return, the answer can be found in the FAQs document that was released on Tuesday
26th of September and currently available from the Core Market Returns UAT environment.

Q7: The 2010 data is required by 30th November 2011; what will be the deadline going forward for this return?:

The deadline for the 2011 year-end data is 4th June 2012. Deadlines for the following TPD return submissions
have yet to be confirmed however since the TPD is expected to replace the SRD completely at year-end 2012,
it is likely to follow a timetable from 2013 onwards that is similar to or possibly slightly ahead of the current SRD
reporting timetable.
Although we will continue to receive data feeds from Xchanging until the GQD return’s go-live date. Following
assessment of the quality of the GQD historical data as at 2010 Q4, we will decide on a case by case basis
whether a similar exercise is needed for the 2011 Q1 and 2011Q2 data. we will then decide whether or not to
ask a managing agent to submit historic data depending on the quality of the data held for its syndicates.

The GQD return for Q3 2011 does not need signed off as per the form 910. This form exists in the GQD
specification but not in the actual return. Discussions are ongoing internally as to whether sign-off under
business as usual reporting will be necessary.
The return must be signed-off by two Executive directors. Use of the sign-off function in the software
constitutes formal notification to Lloyd’s that the return has been approved by a person authorised to represent
the directors. There is no form 910 on this return and no need to provide any hard copy or approval to Lloyd's.
True - also acquisition costs on the unincepted but contractually obliged business.


As per the Solvency II regulations TPs must be calculated every quarter. In addition to these aspects being
requirements, it also constitutes good practice when attempting to understand the differences between
calculating TPs at half year and at year end. It is also likely that the half-year position will form the basis of the
roll-forward to year end (rather than the previous year end) and therefore be less dated.




Yes as there will be big differences between mid-year and year end on unincepted business.
This must be done on an agent by agent basis as different agents will have different classes of business.
Lloyd's does not intend to be too prescriptive in this area as this should be principles based.
Under UK GAAP LCA balances are treated as debtors, however the treatment under Solvency II would be
different. We would expect the balances to be classified as future premium due on signed premiums and
therefore fall within the technical provisions. Note however that these amounts will be net of acquisition costs,
so it will be necessary to gross up and allocate accordingly between premium provisions and expense
provisions. There may also be a credit risk associated with these balances.




Lloyd's anticipates that there will only be 2 sets of technical provisions - UK GAAP (or then IFRS) and Solvency -
the ultimate technical provisions will run off so do not expect the two different SCR base figures to increase the
number of different TPS to be prepared. All reporting will be based on one set of technical provisions for
Solvency and one set for forecasting.
There is still a lot of debate concerning legal obligations of insurance contracts and the treatment of binder
business is an area the industry has yet to reach a stance on. The Lloyd's interpretation is to use a "look
through" approach: A strict reading of the Solvency II guidance would imply that only the underlying policies that
have been written but have not yet incepted as at the valuation date should be included within the valuation of
technical provisions. This is because the contract between an insurer and a binding authority/MGA is not an
insurance contract. There are alternative approaches, e.g. to include all future obliged business that may be
written through the binder or, as you suggest below, to include only legally obliged future business written in the
period up to when the insurer can activate the cancellation clause. Lloyd's will currently accept any of the above
approaches so long as the approach can be justified. It is, however, important to maintain a flexible approach so
that if one of these approaches becomes mandated you can easily amend your approach.
To answer your specific questions:

i) If you are including legally obliged future business written in the period up to when you can activate the
cancellation clause then it would make sense to also apply this to “contracts to bind” that have already incepted
to remain consistent.

ii) Yes this does seem inconsistent and we could encourage you to adopt a consistent approach (please refer to
the comments above for alternative approaches). Under the current Lloyd's interpretation ("look through") this
would not be an issue as the directive only talks about insurance contracts. This is a topic that the LMA
Solvency II working group is looking at and you might like to consider providing input to the group. Please
contact Gary Budinger for further information.




Ceded premiums covering policies not yet incepted or legally obliged should not be included in technical
provisions. This is in line with the Lloyd's Technical Provisions guidance (Page 41) - "Correspondence would
only include expected recoveries on existing inwards contracts. Similarly, any future premium should be
apportioned to only include the expected cost relating to existing inwards contracts".


Future premium income should be entered as a positive amount. Expected profit commission outgo should be
deducted from this expected future premium income. If you only have expected profit commission outgo and no
expected future premium income then this should be entered as a negative amount.

The checks in this sheet look for reconciliations to the decimal point, there is no rounding applied. As long as
you are comfortable that the movements are sensible and the 'FALSE' flags have been checked then we have
no problem with these being false.


As per the Lloyd's Submission Instructions for the Standard Formula QIS5 rerun, Funds At Lloyd's and Funds In
Syndicate should not be included on the balance sheet or in the modelling of risk on FAL for the standard
formula SCR. Lloyd's will be modelling this centrally.
Yes, reinstatement premiums on earned business should go in the claims provisions. This is mentioned
on page 32 of the guidance ("In a change to previous guidance, Lloyd’s current interpretation is that premiums
relating to claims that have already occurred should now be incorporated into the calculation of outstanding
claims provisions") - the reference on page 41 is now outdated and should be ignored.
Paid reinsurance acquisition costs have been reported by most syndicates on the SRD 199 for some time.
Although it has not been necessary for Managing Agents to allocate these to risk code, Lloyd's has done this on
their behalf. For estimating provisions for reinsurance acquisition costs to be incurred on reinsurance future
premium in the TPD 599, Lloyd's would expect Agents to make reasonable assumptions in deriving these
amounts. If these costs are not fully collected, Lloyd's would expect these to be collected in future and any
assumptions or estimates around the reserves for these amounts be based on appropriate approximations.

Lloyd's recognises the difficulty for Agents in estimating certain data items in their technical provisions and
understands that these will be estimates. Future data capture of these costs will help calculate more reliable
estimates of these amounts in future.

Under Solvency II, all expenses to be incurred in servicing contractually obliged policies during their lifetime
should be included within the best estimate. In order to quantify the reinsurance commissions paid by Agents,
Lloyd's is collecting these acquisition costs separately from the gross of acquisition cost reinsurance premiums
in the same way that it does Gross Gross Premium and Gross Acquisition Costs.




Lloyd's expects agents to report on all material currencies they are dealing in. TP reporting requirements are
now confirmed at 6 plus 1 and Lloyd's will review balance sheet requirements. Lloyd's will make these splits as
consistent as possible across returns.


We do not have a list yet of what falls under "S2 reports", however key Solvency II reports are as follows:

Technical Provisions Data (TPD)
Gross Quarterly Data (GQD)
Lloyd's Capital Return (LCR)
LIM asset data future premium debtors will be modelled within the gross technical
Given that any
provisions, unrequested expected future reinsurance premium outgoings should also be included in the net
TPs. Any corresponding amounts sitting in the assets as debtors and creditors should be removed to avoid
double-counting.
The movement of the risk margin over the year will have a large change so this should be calculated outside the
model.
We will not be collecting risk margins for the may exercise, but will do so for future exercises. Further details of
the increase in granularity for future submissions can be found in our technical provision submission guidance
and workshop slides explaining the process.
Please refer to the June TP/SF workshop slides.

This is currently being implemented by agents using a number of methods - Lloyd's is unlikely to mandate an
SCR to use but will consider issuing best practice guidelines on this subject.
Level 2 requirements state that technical provisions should be calculated in all currencies and segmentation by
country should be going away. Settlement currency is fine as long as this is right and corresponds to exposures
- needs to be justifiable.

Surplus assets should be excluded from the opening balance sheet for the SCR calculation. A profit at the
mean does not necessarily imply surplus assets should be included. A profit should occur at the mean due to
A) A profit arising on the prospective year's business B) Unwinding of the discount rate being greater than the
risk-free rate




Agents must be flexible when considering this, especially for reporting purposes. There is every possibility of a
change in the future (e.g. Lloyd's China).
The treatment of binders on a legal obligation basis is yet to be resolved. Lloyd's will not be mandating an
approach for binder inclusion but Agents must remain flexible if the requirements do become clearer in future.

The reference to economic conditions could be misleading as the path dependency doesn't have to be
economic. You need to decide if any elements of your cashflows are path dependent. For example, the chain
ladder assumes that development is independent from prior developments for a cohort (so not path dependent)
although many people would not agree with this assumption. The point is here is that if you think your cashflows
are path dependent you should select methods that recognise that. A good example would be reinsurance bad
debt where your assumption for RIBD in a future time period, let's say year 11, depends on what you've
assumed for years 1 - 10. An economic example could be inflation which can be linked to interest rates. If you
are explicitly deriving inflation from interest rates then most models should recognise that interest rates in time
period t+1 will have some dependency on the interest rate assumed in time period t etc.

This is about ensuring you have selected a method which is appropriate and takes into account different drivers
of uncertainty such as a change in the legal environment or the onset of a recession. Similarly to "Whether
cash flows are materially path dependent…", it's really saying make sure your model captures the drivers of the
cashflows - or be prepared to explain why it doesn't.

Please use the Q2 period end exchange rates for the half-year and projected year end technical provisions.
"You are correct that there is a row missing in the template, there should be an additional row inserted below
"Life RI - Other Life reinsurance - Death" in the template and "LOR_D" inserted in cell C1899. Due to the small
nature of this error and the limited impact on the majority of the market Lloyd's will not look to reissue the
template. If Agent's wish to automate the completion of the template they may wish to make the changes
described above. However, please be aware that for the September TP submission Lloyd's will require
submissions to be in the format supplied on lloyds.com so any amendments made to the template should be
removed before submitting."

This is not an error.
All gross and reinsurance future premium in the September submission template should be entered gross of
acquisition costs - that is before deduction of acquisition cost. The gross premium can be referred to as "gross
gross" and is consistent with current financial reporting requirements (for clarity if the premium payable is £100
which includes £20 of acquisition costs then £100 is the premium gross of acquisition cost and £80 is the
premium net of acquisition costs). The premium (gross of acquisition costs) should then be deducted from the
claims element of the technical provisions to derive the best estimate.
 Gross future premium involves two cashflows that offset each other. The "gross gross" premium income (a
cash in-flow) is offset by the associated gross acquisition costs (a cash out-flow). Once reduced this could be
termed "gross net" future premium (i.e. net of acquisition costs but gross of reinsurance costs)
 Reinsurance future premium is different in that there are two outflows (from the perspective of the syndicate).
The first is the "true" premium payable to the reinsurer to cover the risk (i.e. the premium net of acquisition costs
from a reinsurers perspective). The second is the cost of acquisition of the reinsurance - payable to the
reinsurance broker. This second item (from the perspective of the syndicate) can be offset with any return or
overrider commissions and may become a cash in-flow (that is reinsurance acquisition costs can be either a
cash in or out flow).
 The RI "Gross" Premium includes both elements (i.e. the premium payable to the reinsurer net of acquisition
costs plus reinsurance acquisition costs). Therefore when deducting the RI "gross" premium from the inwards
premium cashflows the RI acquisition costs are already accounted for in the calculation.
 In other words to get the premium net of reinsurance and net of acquisition costs (i.e. the amount ultimately
The six currencies (USD, GBP, CAD, EUR, AUD, JPY) Lloyd's has highlighted are those that Lloyd's considers
material to Lloyd's. If a syndicate has what it considers material exposure to a currency not within these 6
buckets then they should have already requested the additional yield curve from Lloyd's with which to perform
the discounting explicitly. If a syndicate has material exposure to (for example) HKD, then this would need to be
discounted with the HKD yield curve (as it is material to the syndicate) but it would be reported to Lloyd's in the
'Other' currency bucket.

Currencies which are immaterial to both the syndicate and Lloyd's which will be reported in the 'Other' currency
bucket may simply be discounted using the GBP yield curve.

Currency segmentation should be performed according to the underlying original currency unless the Managing
Agent wishes to report in settlement currency and can demonstrate that the difference between the two is not
material. Moreover, currency segmentation for reporting purposes should be performed according to the
underlying original currency of the inwards business such that there is consistency between the gross and the
net of reinsurance amounts at an individual currency level. This is a similar concept to class of business (in the
September return)/ risk code allocation (in the TPD return) where reinsurance recoveries should be reported in
a consistent manner with the gross amounts and not allocated to another risk code. This ensures there is
consistency between the gross and net of reinsurance amounts reported.

Discounting, however, should be performed explicitly in the underlying currency. For example, for inwards
business with an original currency of JPY, gross amounts should be reported and discounted in JPY. If these
inwards losses are covered by an outwards policy with original currency GBP then the reinsurance amounts
relating to these inwards losses (claims and premiums) should also be reported in JPY but discounting of these
amounts should be performed in GBP. If, however, the exchange rate is stipulated in the reinsurance contract
then discounting should be performed in JPY as this is where the underlying currency exposure is.
The only difference from the SRD reporting is the switch from settlement to original currencies and the
additional currencies required.

All currencies should be reported which are material to the syndicate, this should be in the 6+1 unless prior
consent has been given by Lloyd's to report in fewer. Each explicitly reported currency should be reported in
that currency. GBP, "Other" and £CNV should be reported in GBP at the prevailing rates which the syndicate
discloses on the return.



The TPD return should be submitted on a slightly different basis from the September TP.

In the TPD 599, Life Syndicates need to split Earned (Claims Provisions) and Unearned (Premium Provisions)
reserves for all pure years of account in the same way an non-life syndicates to ensure market consistency in
the return.




The wordings are consistent - there are two requirements an agent needs to consider: 1. That the TPs are
segregated by all the material currencies (as per main TP guidance). 2. For ease of use from a systems/data
perspective - agents are expected to use settlement currency as the base. If this is the case then the settlement
currencies selected must capture all the material underlying original currencies (as outlined in the TPD
guidance). However, agents can use original currency if they wish. Lloyd's are not mandating original or
settlement but do have the caveat that when using settlement currency there needs to be evidence the split
does cover all the underlying material currencies separately., The agent needs to decide / evidence materiality
and this will be reviewed by Lloyd's.
You are correct - From our current understanding of the requirements the TPD is missing 8 columns, these
being:
- Gross Amount Claims Provisions Future Premium
- Gross Amount Claims Provisions Future Premium Discount
- Gross Amount Claims Provisions Future Acquisition Costs
- Gross Amount Claims Provisions Future Acquisition Costs Discount
- RI Share Claims Provisions Future Premium
- RI Share Claims Provisions Future Premium Discount
- RI Share Claims Provisions Future Acquisition Costs
- RI Share Claims Provisions Future Acquisition Costs Discount
Lloyd's will not be updating the TPD for the November submission as Agents may be well progressed with the
completion of these forms but instead make these changes for the next submission in June 2012.

Agents should allocate all earned future premium and the cashflows associated with these in to their
corresponding premium provision columns alongside the unearned premium amounts for this submission. The
TPD was designed prior to CEIOPS/EIOPA deciding that future premium needed to be split in to earned (claims
provisions) and unearned (premium provisions) amounts, previously it was Lloyd's understanding that all future
premium was to be allocated to premium provision. Lloyd's was awaiting final confirmation of the need to split
these amounts, it now appears that this is the case. The 2010YE TP calculations submitted to Lloyd's in May
The TPD return will be released in UAT on 26/09/2011. Both the CSV template and Offline Validator will be
available at that time.

The production release date is 21st October 2011.
“Lloyd's will not be going through a formal process of reviewing and assessing each Agent's allocation process.
Lloyd's will be reviewing documentation of allocation methodologies in exceptional circumstances where (upon
review of the TPD for example) there are questions raised around the allocation used. In any case Lloyd's
expects Agent's to be documenting their approach to allocation for the TPD and for this to be provided upon
request if necessary.”




Unfortunately, this issue was only identified after the TPD return’s production release on 21st October 2011. As
a result we are unable to provide a fix in time for the November TPD submission. In order to ensure that the
numbers submitted in the TPD return are consistent with the May TP submission, agents should combine the
2011 Year of Account amounts with the 2010 Year of Account’s numbers in the TPD 598 and 599. It should be
noted however that this is a one off arrangement applicable to the 2010 year-end return submission only. For
the 2011 year-end return in June 2012, agents will be expected to submit the data for the non incepted business
separately




We would advise that the TPD need not reconcile exactly but we need to collect the 2011YoA consistent with
the May return. We are happy to accept changes in amounts due to improvements in methodology and
assumptions.




The sign-off process for the TPD is the same as that for the SRD. Agents must complete form 910 which is
obtained when the return is printed. This must be provided to Lloyd's as a hard copy.
This is correct, the undiscounted risk margin is simply the sum of future undiscounted SCRs multiplied by the
cost of capital rate. Lloyd's wishes to assess the impact of discounting on the risk margin and is therefore
requesting this information in the TPD.




The definitions are now in the version of the spec that is on the Solvency 2 website.

All other non-ULAE and acquisition costs incurred in running off the business e.g. Admin and Investment
Management.




Similar to form 299 on the SRD (and the new TPD) reinsurance bad debt is not collected explicitly on the 599.
As you have said this should be netted off the recoveries.




As set out in the TPD instructions, Lloyd's will require the Syndicate Actuarial Functions to justify any proposals
for merging currencies considered non-material for TPD reporting purposes. This justification must include
supporting evidence.

The selection of materiality trigger points for TPD reporting is a decision for each syndicate and Lloyd's will not
mandate these. However, the justification submitted to Lloyd's should comment on how these thresholds were
selected.

The evidence for a particular currency being considered immaterial should include details on how the liabilities
in this currency have historically compared with the thresholds selected. Plans to increase the volume of
business in a particular currency should be incorporated into any decision. Lloyd's also expects the Syndicate
Actuarial Functions to consider the Solvency II requirement for Homogeneous Risk Groups in Technical
Provisions calculation and the effects on these calculations of the proposed currency merging (including term
structure considerations).
For TPD, the reporting of currencies will need to be performed as set out in the TPD instructions (note the
discussion on page 13 of the TPD instructions about being able to merge some "immaterial" currencies):

It should be noted that, in all cases, original currencies need to be considered rather than just settlement
currencies. Syndicates can report in their major settlement currencies but only if there is supporting evidence
that the split of settlement currencies does capture all the material underlying currencies. For example, if
Australian Dollars represents an immaterial currency and is settled in Sterling, then this may be reported within
the Sterling bucket. The key consideration is materiality.

The above suggests that an agent can use a major settlement currency (where different from the original
currency), as long it is not material. Definition of materiality is the responsibility of the managing agent and their
actuarial function.


No, we do not expect to see differences in the Technical Provisions submissions and the TPD return simply as
a result of different allocation to currencies. The TPD instructions probably give the best guidance on currency
and are actually applicable to both submissions and so should be referred to in this instance. Essentially, what
we are saying is that in both cases original currency should be used and syndicates can report in settlement
currency only if settlement currency captures the material underlying currencies. In cases where settlement
currency is used as a proxy for original currency, it is the responsibility of the agent to provide supporting
evidence as to why this is appropriate - further details of this are provided in the TPD instructions.
We will apply materiality at Lloyd's level - as long as the agent knows the currencies to be reported they can set
up their systems to report the 5+1/6+1 and it will be easier for them not to attempt to combine very small
amounts of one currency with another.




Agents should use the most up to date version of the template for the submission in September. The template
on the website is clearly labelled with the version number. The current version is version 2. The formula to
calculate the Total Undiscounted RI Best Estimate TPs (excl Risk Margin) for the Premium Provision has been
amended since version 1.
There is still uncertainty in the industry on unincepted business so Lloyd's cannot mandate the method at this
stage.

There are two unincepted premium fields on the return. These were added at the request of MRC and so they
may be better placed to define these.

unincepted premiums brought forward - This is premium to which the syndicate is contractually obliged to
accept that has an inception date after the end of the year of account of the business plan. For syndicates
currently completing their 2012 plans, this would include the contracts they have signed up to on or before
The information must be set out by pure underwriting year.
Valuation for Q1 submission should be as at 31/3/13, however, valuation performed as at 31/12/12(based on
Solvency II valuation principles) could be used for Q1 return as long as the following is carried out:
Adjust the 31/12/12 valuation with movements during Q1 2013
Determine technical provision for business written in Q1, including legally obligated contracts as at 31/03/13.
The process for determining quarterly technical provisions could be similar to that adopted currently for QMA
reporting and the only difference is that valuation under Solvency II should be in line with Solvency II valuation
principles.




Lloyd's would expect to release these in July.


Lloyd's produced half-year 2011 yield curves for the technical provisions submission in September (as at half-
year 2011 and projected year-end 2011). Lloyd's shall only be producing these when required for future
exercises and when EIOPA do not produce their own. As there were no submissions as at 30 September 2011,
Lloyd's did not produce the curves.

The agent may wish to derive their own using a similar methodology as described on the front page of the half-
year 2011 curves or could simply use these half-year curves as they stand.
Included twice
Included twice

				
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