European insurers at risk of Solvency II non-compliance
17 January 2012 London
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A new study from Intedelta and BNP Paribas shows that firms have made some headway towards the Solvency II directive's requirements, but embedding risk governance into the business is lagging.
The survey of European insurance companies measured firms’ progress towards delivery of the Solvency II directive’s requirements, while identifying particularly challenging areas that threatened compliance.
Data requirements stipulated by Solvency II are extensive, spanning enterprise, portfolio and reference data typically housed on a multitude of systems within both the insurers and their suppliers' organisations.
According to the study, a significant reliance on third parties for data, sophisticated risk modelling requirements and obtaining sufficiently detailed fund data were among the challenges identified by European insurers in order for them to meet Solvency II requirements, which are effective beginning 2014.
57 per cent of respondents reported a significant dependence on third-parties for risk modelling and other critical data requirements, challenges in sourcing data of sufficient granularity for certain funds and products were also reported while 80 per cent identified affiliated and third-party fund managers as key data dependencies.
In addition, 60 per cent of insurers were yet to address the directive’s disclosure requirements around public and regulatory reporting, anticipating that these will continue to develop. While most perceived these requirements to be straightforward, many acknowledged that the scale of input presented a significant challenge within the deadline.
Commenting on the research, Maxime Gibault, head of insurance companies at BNP Paribas Securities Services said, “While insurers have made a lot of progress towards gathering the quantitative requirements for Solvency II, the industry must now urgently address the directive’s risk management and reporting requirements.
“New data traceability processes, additional data governance and new criteria for mandate reporting were all identified as being of critical importance to insurers. Yet, each of these appears challenging for some insurers that hold assets with third party managers, or those that hold externally-pooled funds requiring look-through reporting.
“What is clear is that insurers must re-engage with their asset managers over Solvency II in order to be compliant by 1 January 2014.”
Respondents also noted that the implementation of Solvency II is a major cultural change, for example, embedding risk management at all levels and day-to-day processes, but it is also better business management.
The survey of European insurance companies measured firms’ progress towards delivery of the Solvency II directive’s requirements, while identifying particularly challenging areas that threatened compliance.
Data requirements stipulated by Solvency II are extensive, spanning enterprise, portfolio and reference data typically housed on a multitude of systems within both the insurers and their suppliers' organisations.
According to the study, a significant reliance on third parties for data, sophisticated risk modelling requirements and obtaining sufficiently detailed fund data were among the challenges identified by European insurers in order for them to meet Solvency II requirements, which are effective beginning 2014.
57 per cent of respondents reported a significant dependence on third-parties for risk modelling and other critical data requirements, challenges in sourcing data of sufficient granularity for certain funds and products were also reported while 80 per cent identified affiliated and third-party fund managers as key data dependencies.
In addition, 60 per cent of insurers were yet to address the directive’s disclosure requirements around public and regulatory reporting, anticipating that these will continue to develop. While most perceived these requirements to be straightforward, many acknowledged that the scale of input presented a significant challenge within the deadline.
Commenting on the research, Maxime Gibault, head of insurance companies at BNP Paribas Securities Services said, “While insurers have made a lot of progress towards gathering the quantitative requirements for Solvency II, the industry must now urgently address the directive’s risk management and reporting requirements.
“New data traceability processes, additional data governance and new criteria for mandate reporting were all identified as being of critical importance to insurers. Yet, each of these appears challenging for some insurers that hold assets with third party managers, or those that hold externally-pooled funds requiring look-through reporting.
“What is clear is that insurers must re-engage with their asset managers over Solvency II in order to be compliant by 1 January 2014.”
Respondents also noted that the implementation of Solvency II is a major cultural change, for example, embedding risk management at all levels and day-to-day processes, but it is also better business management.
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