Solvency II vital in business transformation - CIOL Feature

To meet challenges of risk management systems

'Solvency II vital in business transformation'

For many insurance companies in Europe, Solvency II necessitates significant business and technical transformation of their risk management systems, says Abhishek Toraskar, manager in a BIG 4 Consultancy

Abhishek Toraskar

Thursday, April 21, 2011

Solvency II compliance is one of the top most things on the agenda of European insurance companies. Most of the insurance companies are long way into their Solvency II implementations with the aim to go-live before Nov 2012, which the regulation comes in force. However, a lot of companies have still not made a start.

The requirement of the directive is for insurers to demonstrate that they hold sufficient capital, are able to manage their risks, and are able to protect the policyholders even in adverse conditions.

For many of the insurance companies, Solvency II necessitates significant business and technical transformation of their risk management systems. Technology initiatives will primarily include a more rigorous risk of governance framework, refinement of the internal models, and more robust and transparent reporting systems. The typical Solvency II architecture can be represented as shown below:

For large insurers, IT will play a central role in ensuring that requirements for all three pillars of Solvency II are met comprehensively. As part of our work done in supporting companies with Solvency II strategy, we have uncovered numerous information management challenges.

Data Standardisation

Many organisations have different ways of referring to the same set of data across various teams, and this causes problems in understanding, reuse and maintenance of data across the firm. There is a lack of consistent and single metadata and reference data repository which makes it difficult for capital adequacy calculations to be represented and reported meaningfully and comprehensively to internal stakeholders as well as external regulators.

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