AGENT

SYND. No.

Date
Completed by

Valuation and Balance sheet

1. Valuation of assets
2. Valuation of other liabilities
3. Valuation of own funds

Relevant S2 Documentation
EU Directive

Articles 75; 87-97

CEIOPS Advice

DOC-31/09; 39/09

Lloyds Detailed Guidance 2010

N/A

The Requirements listed in the following tables are summaries from the CEIOPS Advice blue pages. Agents are encouraged to read the Advice in its entirety.
Agents should use the following worksheets to explain for each section how the relevant Solvency II requirements are being met and detail the supporting evidence available.
They should also update for each section the RAG rating denoting the current status of that element in line with Lloyd's published expected progress. Please refer to the
'Instructions' worksheet for more details.

Overall Comments

Guidance notes for completion of Evidence Templates

Notes below provide commentary around each of the columns on the individual template worksheets and set out what information should be completed by agents

Column Heading

contents

Latest self-assessment score

At the top of each sheet is a drop down box to include the latest self assessment score submitted to Lloyds.

RAG

At the top of each sheet is a drop down box for agent RAG self assessment for that area. Please note that GREEN denotes that you
are in line with Lloyd's expected progress; AMBER denotes that you are not far from where you should be at the present stage and
that the gap is relatively small; and RED denotes that gap is material

CEIOPS Advice

Provides the reference number of the relevant Consultative Paper published by CEIOPS. No further completion necessary.

CEIOPS Advice Requirement

Sets out the specific CEIOPS requirements as contained in Level 2 material above. No further completion necessary.

Has requirement been met

Please use drop down box to detail progress made against requirement and whether it has been fully met at this stage - choice of Yes,
No or Partially.

Explain how final requirement has been met / progress to date

Please complete free form box to provide a description of how requirement has been/will be met and an update on progress and any
specific actions undertaken to meet Lloyd's recommendations or feedback.

Evidence available & Type

Please complete free form box and list all evidence available to support a particular requirement and comments made in previous
column on progress. Each piece of evidence should also be classified as Document, Process, System or People.

Date available

Free form box to detail the date that each piece of evidence will be available for review.

Person responsible for making evidence available

Free form box to detail the specific individual within the Managing agent who is responsible for making each piece of evidence
available for review.

Latest self-assessment score

1. Valuation and Balance sheet

CEIOPS Advice
31/09
3.31-3.44

CEIOPS Advice Requirement

Has
requirement
been met

Explain how the final requirement has been

met / progress to date

Evidence available & Type

RAG

Date
available

Person
responsible for
making evidence
available

Valuation of Assets - Valuation methodology

For solvency purposes the assessment shall be made on the individual balance sheet items,
and shall not be intended as a valuation of the transfer price of the whole entity.
Wherever possible, the fair value of assets must be based on a mark to market approach,
based on readily available prices in orderly transactions that are sourced independently.
Where marking to market is not possible, mark to model procedures shall be used (marking
to model is any valuation which has to be benchmarked, extrapolated or otherwise calculated
as far as possible from a market input).
Undertakings must have adequate systems and controls sufficient to give senior management
and supervisors the confidence that their valuation estimates are appropriate and reliable.
There shall be documented policies and procedures for the process of valuation, including the
description and definition of roles and responsibilities of the personnel involved in valuation,
as well as the relevant models and sources of information to be used
The assets subject to marking to model shall be identified and the reason for marking them to
model approach shall be explained
The valuation uncertainty, for example caused by using unobservable inputs shall be properly
evaluated and reported to the senior management so that they are well aware of the situation
There shall be an internal review process of compliance with policies and procedures applied
on valuation
Undertakings shall demonstrate that they employ personnel with the skills and knowledge
necessary to properly develop and calibrate models based on historic and current data
There shall be a proper four-eye review of the valuations performed, with clear description of
the sign-off process including accountability and the process in place to resolve any challenge
from any independent source
The models used shall be subject to periodic verification to determine their appropriateness
for the set objectives. Valuation adjustments shall be made as appropriate, for example to
cover the uncertainty of the model valuation.
Undertakings shall obtain regular external, independent value verification for assets for which
there are no homogenous markets and in situations where application of different valuation
models is possible. In specific cases of complex instruments and valuation techniques,
external independent value verification may also be appropriate.

3.80-3.82

3.115

3.12

3.157-3.160

Valuation of Assets - Investment property

Information regarding the methodologies used for the valuation of investment property and
the date of last revaluation (as well as the date of hypothesis and data used in the last
revaluation) shall be provided to supervisors on request.
Valuation of Assets - Financial assets
Financial assets as defined in the relevant IAS/IFRS on Financial Instruments shall be
measured at fair value for solvency purposes even when they are measured at cost in an
IFRS balance sheet.
Valuation of Assets - Contingent assets & liabilities
Contingent assets or liabilities will not be recognised for solvency purposes but should be
reported to supervisors and be subject to continuous assessment.
Liabilities other than insurance liabilities

1.VALUATION OF ASSETS

CEIOPS Advice
31/09

CEIOPS Advice Requirement

Has
requirement
been met

Explain how the final requirement has been

met / progress to date

Evidence available & Type

Date
available

Person
responsible for
making evidence
available

When liabilities are clearly designated as own funds and subject to the requirements set in
the CEIOPS Level 2 advice on own funds, the value of these liabilities shall consider own
credit standing of the (re)insurance undertaking at inception. Non-insurance liabilities that are
eligible for own funds shall be measured using fair value as a suitable proxy at initial
recognition in the solvency balance sheet. At a subsequent valuation date no adjustment for
any subsequent changes in the undertakings own credit standing will be made.

3.174-3.176

Liabilities arising without an observable transaction price at first recognition (i.e. provisions)
shall be valued by using the risk-free rate.
Post employment benefits
CEIOPS recommends the application of the applicable IFRS on post-employment benefits.
CEIOPS considers that elimination of smoothing (corridor) is required to prohibit undertakings
coming out with different results based on the treatment selected for actuarial gains and
losses.
CEIOPS believes that undertakings shall not be prevented from using their internal economic
models for post-employment benefits calculation, provided the models are based on Solvency
II valuation principles applied to insurance liabilities, taking into account the specificities of
post employment benefits.
Classification and eligibility of Own Funds
Valuation methodology for assets and liabilities comprising Basic Own Funds under Solvency II, setting
out each major component separately
Managing agents must be able to classify the own funds held in syndicate premiums trust funds
including capital provided as funds in syndicate (FIS) by Tier and provide if required. These will
generally be Tier 1 except for letters of credit and bank guarantees held in trust by Lloyd's in favour of
insurance creditors held within FIS, which are Tier 2 in accordance with Article 96 (2) of the Directive.

1.VALUATION OF ASSETS