Significant improvements in XBRL data quality over first six years of Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) has published a fascinating report taking stock of data quality in Solvency II disclosures, and how it has developed in the six years since this XBRL reporting requirement was introduced. “Reliable data is the basis for successful data-driven supervision, evidence-based decision making and micro- and macro-prudential analysis,” argues the report – and we heartily agree. It finds that “automated data quality processing solutions and advanced analytic tools together with built-in validations in the XBRL taxonomy have been effective in raising the quality of data” over time. This is reflected in a range of metrics, with an aggregate quality benchmark indicator for annual solo reporting rising from 82% back in 2016 to 94% in 2020.
Validation rules are a key part of improving data quality, says the report. This growing set of validation rules is used by filers to check reports for data quality errors, enabling corrections if needed before submission to the national supervisors. They are also part of an ongoing virtuous cycle: “EIOPA uses detected data quality issues as a trigger to introduce new or further improve the existing validations.” Interestingly, the report notes that in the original taxonomy many validations were ‘non-blocking,’ meaning that the detected quality issues would be flagged to national authorities, as well as to filers allowing a potential response, but the data could still be submitted. EIOPA now intends to change the severity of certain validations to ‘blocking,’ so that these issues must be fixed before submission.
Another positive indicator is that the use of the Legal Entity Identifier (LEI) has increased significantly since 2016. As the report observes, the correct and unique identification of entities is crucial to link information coming from different data sources, to combine information and to build connections and networks. Therefore, “the consistent use of the LEI increases the quality of the reported information.”
The report also describes the intensive and wide usage of Solvency II information by EIOPA. This is enabled by a centralised database fed with the structured XBRL data received by EIOPA from national supervisors. “EIOPA uses the Solvency II data for very different types of analyses, such as individual insurer or group assessments, statistical publications, financial stability and consumer protection studies and to substantiate policy technical advice and impact assessments,” says the report. “Further to the use within the supervisory community, EIOPA supports external data users, like the European Commission, the ECB, the ESRB and the IAIS, with aggregated reports and the general public, industry, academia, etc. with the publication of sectorial reports and statistics based on Solvency II reporting data.”
This all makes excellent reading, but of course it is no time to rest on our laurels. The report emphasises that data quality is an ongoing and valuable task, requiring consistent efforts from reporting entities, national supervisors and EIOPA itself.
Read more here.