Finansinspektionen (FI) has identified extensive quality deficiencies in the reporting of insurance firms. These deficiencies are a sign that the internal governance and control of many of the firms’ reporting procedures are unsatisfactory. Through this document, FI provides guidance for insurance firms for how they can strengthen their reporting procedures.
The reporting of insurance firms is stipulated by law and aims to provide FI and other stakeholders with insight into the firms’ operations. Poor quality of the reported data is preventing FI from conducting effective supervision and protecting policyholders. High-quality reporting is also an issue that is being discussed at the EU level through the European Insurance and Occupational Pensions Authority (EIOPA).
Over the past year, FI has carried out a number of activities to highlight the need for the firms’ reporting to meet a high level of quality. FI has had an ongoing dialogue with the firms, held an FI Forum and sent a survey to a total of 146 insurance firms.
FI would like to emphasise that the boards of directors are responsible for both the reporting procedures and the reporting itself. It is crucial that boards of directors emphasise for their organisations the importance of correct reporting and compliance with governance documents and reporting procedures. FI would also like to emphasise the importance of the boards allocating sufficient resources to the reporting task.
In order for the reporting to meet a high level of quality, it is necessary for there to be policy documents in place that describe the reporting procedures and responsibilities, and these documents also need to be applied in practice. Insurance firms should define materiality for the various reports and data in order to be able to design effective reporting procedures and avoid material errors in the reported data.
FI believes that duality in the reporting procedures and traceability of data that serves as a basis for the reporting are necessary components of a good internal control environment. FI also believes this is an industry standard.
During 2017, insurance firms disclosed for the first time their solvency and financial condition reports, which target external stakeholders such as policyholders, re-insurers and analysts. Because the reports can serve as the basis for many different business decisions, it is of particular importance that these reports do not contain material errors.
Given the major deficiencies in the reporting and the importance of FI obtaining an accurate overview of the insurance firms, reporting will continue to be a focus area for FI.