Insurer Annual Returns Thematic Review 2018

Summary

This is the GFSC's report on its 2018 Thematic Review of insurer annual returns, examining whether the quantitative and qualitative information licensed insurers submit through the Commission's online portal is complete and accurate. It reviews controls used by external auditors and insurance managers/self-managed insurers when preparing and checking annual returns, and sets out findings, good practice examples and areas for improvement.

The review found significant error rates: over a third of sampled returns had errors in the Key Figures (Sterling) subsection and 19% had errors in the regulatory solvency assessment (RSA). As a result, the Commission signals it intends to require insurance managers to self-certify the effectiveness of their regulatory reporting controls and to issue further guidance on completing the annual return.

• Legal basis restated: Section 33 of the Insurance Business (Bailiwick of Guernsey) Law, 2002 requires licensed insurers to submit an annual return each financial year, in the form and with the documents specified in the Insurance Business (Annual Return) Regulations, 2008.
• Required attachments: Annual returns must include audited financial statements, the auditor's management letter (where issued), the RSA capital resources calculation, and the Own Solvency Capital Assessment (OSCA) under the Insurance Business (Solvency) Rules 2015.
• Auditor declaration: External auditors must declare any respect in which the annual return information is inconsistent with the audited financial statements.
• General Representative role: The General Representative (an ordinarily resident executive director or approved licensed insurance manager) is responsible for making the return and furnishing required information.
• PCC requirements: Protected Cell Companies must submit aggregated management accounts for the company as a whole plus financial information for each cell, and these must be internally consistent with audited financial statements.
• OSCA rationale: Where an OSCA is not included with the annual return, a rationale must be provided; the Commission states it will make this mandatory for future annual returns.
• Accurate form completion: Firms must correctly select whether a modified audit opinion or emphasis of matter applies, and ensure Key Figures and solvency figures reconcile to audited financial statements.

The report is primarily informational and thematic in nature, but it flags forthcoming Commission actions (self-certification requests to insurance managers, additional guidance, and a likely mandatory OSCA-rationale requirement) that firms and their auditors should anticipate and prepare for.

Key obligations

• Licensed insurers must submit an annual return each financial year in the form and with the particulars specified in the Insurance Business (Annual Return) Regulations, 2008, under Section 33 of the Insurance Business (Bailiwick of Guernsey) Law, 2002.
• Annual returns must be accompanied by audited financial statements, the auditor's management letter (where one has been issued), the RSA capital resources calculation, and the OSCA required under the Insurance Business (Solvency) Rules 2015.
• External auditors must declare any respect in which the annual return is inconsistent with the audited financial statements.
• The General Representative is responsible for making returns and furnishing required information to the Commission.
• PCCs must submit aggregated management accounts for the company as a whole, plus individual cell financial information, consistent with the audited financial statements.
• Where an OSCA is not included with the annual return, firms must provide a rationale for its non-inclusion.
• Firms must accurately indicate on the annual return whether a modified audit opinion or emphasis of matter has been included in the audit report.

Applies to

licensed insurers, insurance managers, self-managed insurers, external auditors of licensed insurers, Protected Cell Companies (PCCs), branches of insurers