Insurers Next in Line for Regulatory Scrutiny

ii__1308647861_p58_solvencyIIRegulatory challenges faced by the financial industry continue to expand with insurers next in line to face an increased focus on report preparation and risk analysis.  Under Solvency II, article 132 of the directive requires companies to invest only in assets and instruments that can be properly identified, measured, monitored, managed, controlled and reported. Meeting this requirement will mean fundamental changes to how the Risk Management and Compliance functions are carried out and will require an increase in spending on risk and performance analytics to improve on the current capabilities across the industry.

Quantitative Reporting Templates (QRT), a specific asset reporting requirement under the directive, will require the insurance industry to provide granular detail and further look through, regardless of whether the insurance company outsources or manages fund administration internally.  In addition, there will be a greater emphasis around risk and reporting data when selecting or building asset reporting solutions, which will be core to meeting this requirement.

I believe the three main challenges currently faced by the industry to address Solvency II reporting will be the following:

  1. Expand internal data warehousing capabilities that exist today to be able to collect and augment the data needed for Pillar III reporting
  2. Purchase off the shelf solutions that will need to be configured to individual insurance company’s specific needs
  3. Augment existing Pillar I + II solutions by purchasing a reporting solution that utilizes XBRL, as there are more than 35,000 tagged data items that need to be identified and reported

Vendors that augment their software solutions with service will be able to better support the insurance industry as gathering data across multiple asset managers, as well as ensuring data is up to date and accurate will be key. Service teams will be able to take most of this effort away from the insurance companies to help compile an accurate set of reports for the regulators.

Solvency II Pillar III reporting “kicks off” in January 2016, so although the industry has some time to prepare, they will need to pull up their socks to ensure readiness for the challenging reporting tasks that lie ahead.

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