Solvency II Pillar 3 focuses on transparency and disclosure, requiring insurance and reinsurance undertakings to report both public and private information to stakeholders and regulators. While Pillar 1 covers quantitative capital requirements and Pillar 2 addresses governance and risk management, Solvency II Pillar 3 ensures that all relevant parties have access to consistent, reliable, and comparable data. It enhances market discipline, facilitates supervisory oversight, and promotes confidence in the financial soundness of insurers.
Public disclosure requirements under Solvency II Pillar 3
A central feature of Solvency II Pillar 3 is the Solvency and Financial Condition Report (SFCR). This annual public report provides a comprehensive overview of an insurer’s business performance, system of governance, risk profile, valuation for solvency purposes, and capital management. The SFCR must be published on the insurer’s website and written in a way that is accessible to policyholders and stakeholders. It includes both narrative sections and selected quantitative templates that mirror aspects of the Pillar 1 reporting.
Private regulatory reporting
Alongside public disclosures, Solvency II Pillar 3 mandates detailed regulatory reporting to supervisors, notably through the Regular Supervisory Report (RSR). The RSR is a private document that provides deeper insights into the insurer’s risk management systems, capital adequacy, and governance structure. It is submitted to national competent authorities and used as a key input in the supervisory review process.
Quantitative Reporting Templates (QRTs)
Solvency II Pillar 3 also requires insurers to submit standardised Quantitative Reporting Templates (QRTs) on both a quarterly and annual basis. These templates cover a wide range of financial, risk, and capital data and must be submitted in XBRL format according to EIOPA taxonomy standards. The structured nature of QRTs allows regulators to perform cross-firm comparisons and detect early warning signals across the industry.
Data quality, validation, and timeliness
Under Solvency II Pillar 3, the emphasis on data quality is significant. Insurers must ensure that reported information is accurate, complete, consistent, and submitted on time. Validation checks, audit trails, and strong data governance processes are critical to meeting Pillar 3 requirements and avoiding regulatory scrutiny or submission rejections.
The value of transparency in Solvency II Pillar 3
Ultimately, Solvency II Pillar 3 is about fostering trust—between insurers, regulators, and the public. By enforcing rigorous reporting and disclosure obligations, Pillar 3 supports supervisory transparency, strengthens financial stability, and helps stakeholders make informed decisions. It completes the Solvency II framework by ensuring that the results of sound capital planning and governance (from Pillars 1 and 2) are clearly communicated and verifiable.
Common Mistakes & Issues
One of the most common issues is inconsistent or incomplete data across QRTs. Misalignments between templates, such as between the balance sheet and own funds, often arise from disconnected data sources, lack of coordination, and insufficient validation controls. Heavy reliance on manual spreadsheet-based processes further increases the risk of formula errors and version control issues.
Misunderstanding EIOPA’s taxonomy updates and reporting instructions is another frequent problem. Insurers may submit outdated templates or misapply rules, particularly regarding look-through investments or currency breakdowns. Late submissions also remain a persistent issue, often due to weak planning or prolonged internal review cycles.
Narrative reports often lack clarity, specificity, or coherence. SFCRs and RSRs sometimes use generic language, fail to reflect the actual business model, or contradict underlying QRT data. Supervisors expect meaningful insights into governance, capital movements, and risk management—not boilerplate text or disconnected figures.
Group-level reporting poses added complexity, with frequent errors in risk aggregation, intra-group eliminations, and solo-group consistency. Firms also struggle to accurately present and explain the structure of their own funds, especially regarding eligibility limits and capital tiers.
Many insurers overlook the importance of independent review, while scenario analyses are sometimes poorly explained or lack sufficient methodological detail. Insurers using internal models must take extra care to ensure alignment between their model outputs, regulatory templates, and supporting narratives.
In summary, Pillar 3 mistakes often stem from weak data governance, unclear processes, and insufficient review. Improving automation, internal controls, and staff training can significantly enhance reporting quality and credibility.