XBRL, Solvency II approach 15th Eurofiling workshop Madrid, 2012-05-31

Agenda Introduction Reporting frameworks in EU Choice of XBRL and architecture Initial taxonomy development: moderately dimensional Introduction of Data Point Modelling and highly dimensional approach EIOPA approach: MD and HD Tool for undertakings

Nov. 2009: Solvency II Directive Implementing measures Solvency II Timeline Nov. 2009: Solvency II Directive Omnibus II Implementing measures 2001 In force 1/1/2011 Technical preparation (advices) Technical standards TODAY

XBRL issues Main issues to solve for a successful implementation Scarcity of available skilled XBRL resources Short timeframe before the go-live date

EIOPA current work Mutualized development An EIOPA effort instead of 30 national efforts A taxonomy project, to be delivered as soon as possible after the availability of the stable reporting package (target: this autumn) Outcome of the technical consultation: cross sector consistency desirable. Experience sharing with the others ESAs (EBA, ESMA) and ESRB Data Point Modelling project launched (EBA used methodology)

Tight deadlines and resources scarcity Stable reporting requirements in June, DPM in September, supporting stable taxonomy this autumn A tool for undertakings project launched To provide a (non mandatory) possibility for undertakings to produce valid XBRL instances from the start EIOPA need to be able to validate, extract, store and then use data Mutualization/sharing possibilities currently examined (e.g. providing a benchmarking validation service)

Agenda Reporting frameworks in EU Choice of XBRL and architecture Initial taxonomy development: moderately dimensional Introduction of Data Point Modelling and highly dimensional approach EIOPA approach: MD and HD Tool for undertakings

Overall reporting framework in EU Countries Europe Reporters NSAs ESAs Logotypes … …

Agenda Reporting frameworks in EU Choice of XBRL and architecture Initial taxonomy development: moderately dimensional Introduction of Data Point Modeling and highly dimensional approach EIOPA approach: MD and HD Tool for undertakings

Path to XBRL Solvency II is a complex reporting Structured XML, first chosen, is not adequate Choice of XBRL, over an EIOPA-specific flat XML language: YARL (Yet Another Reporting Language)

Commonalities with EBA taxonomies Reasons for alignment considerations Certain firms are required to send reports to both banking and insurance regulators Certain software vendors offer products or solutions for both, banks and insurance companies Commonalities between EBA and EIOPA taxonomies under consideration: Common dimensions Data Point Modelling Common data types Taxonomy architecture Base primary items Label construction rules Tools etc

Agenda Reporting frameworks in EU Choice of XBRL and architecture Initial taxonomy development: moderately dimensional Introduction of Data Point Modelling and highly dimensional approach EIOPA approach: MD and HD Tool for undertakings

Taxonomy generated from templates Types Dimension Domain, value or list of values Header dimension(s) Abstract primary items (label or alias) Column dimension(s) Primary items (label or alias) Line dimension(s) Pop-up window showing P.Item + Characteristics + Dim. combinaison(s)

Use of codes for concepts Codes are used as tag names for concepts To get usable names (not too log) To be language-agnostic The codes used are those that are defined by the business people in the Quantitative Reporting Templates (regulatory document) They are not Excel cell coordinates !

A real template (extract)

Additional information needed in annotated templates

Expression of validations Generation of XBRL assertions with code, label, messages, using patterns

Agenda Reporting frameworks in EU Choice of XBRL and architecture Initial taxonomy development: moderately dimensional Introduction of Data Point Modelling and highly dimensional approach EIOPA approach: MD and HD Tool for undertakings

Dimensions in data models only base items few base items, many breakdowns each data point defined as a base item in a combination of members of breakdowns lower number of items in total (Cartesian product is multiplication) distinguishing between base items and breakdowns not always easy supports maintenance: relation concept- breakdown is stable but components of breakdowns tend to change each data point defined as a base item high total number of items easy to define, difficult to maintain significant consequences of little changes to data model which is a base item, what is a breakdown? alignment with design of analytical models

Almost everything is a perspective portfolios Portfolio breakdown (purpose and measurement) e.g. held for trading - „acquired or incurred principally for the purpose of selling or repurchasing it in the near term”; includes different instruments: Derivatives, Loans, Debt securities, Equity instruments, … Instruments breakdown: e.g. debt instrument - „contractual or written assurance to repay a debt”; can fall into different portfolios: Held-for-trading, Designated at fair value, Available for sale, … held-for-trading instruments designated at fair value loans derivatives available-for-sale debt securities income/expense natures assets liabilities assets: property, resources, goods, etc that a company possesses and controls, e.g. financial instruments owned by a reporting entity that shall generate economic benefits in the future liabilities: sources of funding for company’s assets and operations, e.g. financial instruments that have been issued by a reporting entity, thus represents an obligation that needs to be settled in the future by a transfer of some assets (such as cash) from the entity income/gains or expenses/losses: economic benefits that occurred during the period and originated from increase/decrease in value or result on sales/purchase of a given financial instrument

DATA POINT: Net carrying amount of not yet unimpaired but already past due (over 180 days) debt securities held, issued in EUR by MFIs located in EMU with original maturity under one year, measured at amortised cost and relating only to business activities conduced in Spain (local business). Base terms: Assets Liabilities Equity Off-balance sheet Exposures Portfolios: Total (…) Fair value through profit or loss Amortised cost Impairment status All / Not-applicable Impaired Unimpaired Past due periods: All 0 days < 180 days ≥ 180 days Base term: Assets Original maturity: All < 1 year ≥ 1 year < 2 year ≥ 2 years Category: Debt securities Categories: Total (…) Cash Loans Debt securities Equity instruments Tangible and intangible Other than (…) Portfolio: Amortised cost Amount type: Carrying amount Impairment status: Unimpaired Counterparty sectors: All / Not-applicable MFIs MMFs MFIs other than MMFs Central Administration Other general government Non-MFIs other than government Past due period: ≥ 180 days Original currency: EUR Original maturity: < 1 year Counterparty sector: MFIs Amount types: Carrying amount Gross carrying amount (Specific allowances) (Collective allowances) Counterparty residence: EMU Location of activity: Spain Counterparty residences: All / Not-applicable EMU (…) Spain Other than Spain in EMU (…) Other than EMU (…) Original currencies: All / Not-applicable EUR Other than EUR Locations of activities: All / Not-applicable Spain Other than Spain (…)

Annotated templates using generic base items Data can be analysed from multiple perspectives Most changes in the model do not affect primary items

Pro and cons for HD taxonomies Pros Quality check for the model (via DPM) Explicit dependencies between concepts Change management with stable base items Use of breakdowns for internal purposes (databases, BI…) Potential bridge with other reporting frameworks No need for arbitrary decisions (base vs dimensions) Data centric model (template independent) Cons Less readability of taxonomies Bigger instances and lower performances (more breakdowns used) More time and resources required for preparation More complex formulas / assertions with need of dimension filters

Agenda Reporting frameworks in EU Choice of XBRL and architecture Initial taxonomy development: moderately dimensional Introduction of Data Point Modelling and highly dimensional approach EIOPA approach: MD and HD Tool for undertakings

EIOPA XBRL Approach: Two Layers Non-DPM Eurofiling XBRL architecture Annotated templates (limited DPM) MDA taxonomy layer Mapping layer Solvency II templates DPM XBRL architecture DPM-based annotated templates Data Point Model HDA taxonomy layer

Highly dimensional approach Moderate dimensional approach Benefits of two layers Highly dimensional approach Moderate dimensional approach Derivatives, Investments other than held for index-linked or unit-linked funds BS_C1:A10A Assets Types of assets Total Debt instruments Solo or Group Solo or Group Solo or Group Solo or Group Derivatives Solo … Solo Group Investment or own use … Group Investment Periodicity Own use Periodicity Linking Annually Annually Unit-linked or index-linked Quarterly Not unit-linked, not index-linked Quarterly Line of business Monthly Monthly Total Ad hoc … Non-life, non SLT health Ad hoc SLT health Valuation method Non-SLT health Valuation method Life Solvency II Country of custody Solvency II Total Too be redesigned Marked to market … Marked to market Marked to model Issuer or residence country Marked to model Total CRD … CRD Statutory Type of amount Statutory Carrying amount … Original currency Total … …

Mapping layer considerations Mapping approach: Equivalence linkbase Formula linkbase Instance mapping Resource mapping XSLT style-sheets Rendering linkbase Criteria for evaluation of mapping solutions Standard specifications compliance Maintenance of solution Performance of processing (mapping) Resources required for development Support by software vendors

Agenda Introduction Reporting frameworks in EU Choice of XBRL and architecture Initial taxonomy development: moderately dimensional Introduction of Data Point Modelling and highly dimensional approach EIOPA approach: MD and HD Tool for undertakings

Why are we going to provide a XBRL Tool for Undertakings? Solvency II will be applied to all European countries, XBRL is not well known in all of them Tight timeline for the implementation Some small and medium undertakings may have difficulties to adapt their system for the first submissions Principle of proportionality  Providing a Tool for Undertakings

Contributing to XBRL community and open source community What are we looking for? Helping the undertakings without XBRL knowledge, providing a tool to easily create complete and valid XBRL instances of the Solvency II harmonized quantitative reporting Designing the XBRL tool to be reusable for other projects and specifically extensible for NSA local requirements Contributing to XBRL community and open source community

How and when are we going to develop it? 1st Phase 2nd Phase 21/09/2012 29/03/2012 1.-Project Setup Establish the members of the project, general goals, software methodology, calendar, etc. 2.- Create the first draft of the analysis of requirements Identify the scope of the project, analyse the alternatives, create the draft of the analysis of requirements. 3.- The open tender Write and publish a public tender request for an offer which includes the requirements established on the analysis. The interested companies will have 2 months to submit their offers. Timeline 3rd Phase 4.- Evaluation Process Analyse the received offers and choose one of them. 5 .- Design, implementation, test and integration Refine the analysis with the selected contractor, Implementing phase, testing phase, integration and NSA test. 6 .- Publication Publish a release for public test. 7 .- Production, configuration and change management Adaptive maintenance of the project. 11/04/2012 4/7/2012 23/7/2012 26/10/2012 01/01/2013 01/01/2014 01/05/2014

Requirements Use of XBRL label, rendering, reference, formulas, etc. Distribution license for all Europe. Preferable EUPLA license Internationalization: Languages, data formats, currencies, etc. Using the input forms in a similar layout as the public reference templates. Easy to use for administrative staff with limited IT knowledge Allowing reusing or extension of the tool for national extensions Easy to deploy Use of XBRL label, rendering, reference, formulas, etc. XBRL syntax and formula validation at client side 2nd level support Easy to update when the taxonomy changes Open source, reusable Good performance with large amounts of data Multiplatform Note that these requirements are under discussion and not final

Thank you Any questions?