Home Knowledge Central Bank Publishes Paper on the “Look-Through Approach” Under Solvency II

Central Bank Publishes Paper on the “Look-Through Approach” Under Solvency II


On 20 April 2016, the Central Bank published a brief Solvency II Information Note 9 entitled Look-through of Collective Investment Undertakings in template S.06.03 which provides some guidance for (re)insurers in respect of the so-called “look-through approach” (the “Guidance”). This article sets out the high-level background to the look-through approach and outlines the impact of the Central Bank’s recent Guidance on the issue. 


Solvency II requires that the Solvency Capital Requirement of (re)insurers must be calculated on the basis of each of the underlying assets of collective investment undertakings (“CIU”) and other investments packaged as funds. This is what is referred to as the “look-through approach” and it is intended to capture the risk which arises by virtue of the assets and/or investments held by a fund in which a (re)insurer itself has invested. The purpose of the look-through approach is to ensure (re)insurers understand the underlying risk of the financial instruments in which they have invested. The EIOPA Guidelines on the look-through approach provide that (re)insurers should perform a sufficient number of iterations of the look-through approach to capture all material risks.

Regulatory reporting

(Re)Insurers are required to report to the Central Bank, (as part of their quantitative reporting templates), information on the assets in which they are invested by asset category, country of issue and currency. This requires a look-through to the underlying assets of CIU’s in which the insurer is invested and the analysis must be performed until the asset categories, countries and currencies are identified. This approach must also be followed for funds of funds. (Re)Insurers are obliged to ensure that the information, including asset information, provided to the Central Bank is relevant, reliable and comprehensible.

Challenges of obtaining asset information

(Re)Insurers will look to their asset managers to provide the required asset information. Depending on the level and type of the (re)insurer’s investments, a (re)insurer may deal with multiple asset managers who in turn may deal with multiple fund structures. Therefore, obtaining this asset information creates challenges for both (re)insurers and asset managers. For insurance, facilitating the exchange of asset information where a fund of funds structure exists may give rise to confidentiality issues as it involves asset managers disclosing information on their investment strategies to other asset managers.

Central Bank’s Guidance

The Guidance sets out the Central Bank’s position regarding the completion of template S.06.03 in respect of CIUs by (re)insurers experiencing difficulty in providing the level of detail sought by the European Commission’s implementing technical standards on Supervisory Reporting (the “ITS”). The Central Bank’s position is that (re)insurers should make every effort to provide a full look-through of their CIUs as set out in the relevant regulations when completing the reporting template. However, where a (re)insurer can demonstrate that every effort has been made and that, notwithstanding these efforts, they assess that their completion of the template would not meet expectations as set out in the ITS, the Central Bank’s Guidance provides a step-by-step process to which (re)insurers can adhere.  

In addition, the Central Bank points out that it does not intend to provide guidance for industry with respect to what constitutes CIUs for the purposes of correctly disclosing such assets within template S.06.03. Furthermore, the Central Bank does not intend to provide guidance on what materiality might mean in the context of disclosing CIUs within CIUs. The Central Bank notes that further information on both CIUs and on how (re)insurers might apply materiality in terms of regulatory reporting is provided in the Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 and the ITS. (Re)Insurers are advised to consider that information, by reference to their own investment portfolio, when completing their look-through templates.


The Guidance, albeit limited, is a welcome development for (re)insurers experiencing difficulties in addressing the look-through approach requirement. However, it is likely that many elements of the asset-look through will continue to pose challenges for (re)insurers in the months ahead.

Contributed by  Naoise Harnett