Back on (fast) track….
The insurance industry is on track to implement Solvency II by 1 January 2016. It is aimed at overhauling risk and capital management practices within the insurance industry, with the objective of harmonizing the EU regulatory environment, strengthening policyholder protection, modernizing supervision as well as integrating and increasing the competitiveness of European insurers by requiring them to hold enough capital to absorb significant losses.
Solvency II focuses on the risks embedded in the asset side of insurance companies’ balance sheets and requires a detailed look-through process. To facilitate this, Asset Managers will have to provide data to insurance companies, therefore creating new reporting challenges.
Asset Managers: are you ready for the four big challenges?
The new European requirements trigger four key challenges to Asset Managers regarding (1) the identification of look-through information, (2) the definition of reporting template requirements, (3) the implementation of Solvency II calculation modules, and (4) continuing to offer competitive services to insurance companies while remaining compliant.
(1) Look-through
In the scope of the QRT (Quantitative Report Template) and SCR (Solvency Capital Requirements), Asset Managers will have to provide data at the Position and Instrument level with a high level of granularity and in a structured template. As per EIOPA-CP-14-045, Investment Funds held in the portfolios of insurance companies have now to be considered in detail. In this process, the Asset Manager plays a key role in the sense that he is responsible for providing relevant and accurate data which will then allow the actuaries of insurance companies to compute and report accurate figures forregulatory purposes.
(2) Reporting requirements
QRT and SCR reporting format requirements (from the Asset Manager to the insurance company) are still (and might probably remain!) unclear as no standardized template is expected to be defined by the regulator(s). The so-called “Tripartite Data Exchange Template” set up by Club Ampere – sponsored by the French Asset Management Association, the BVI in Germany and the Investment Association in the UK, is the most advanced template available to Asset Managers as of today. However, each insurance company might have its own specific data requirements (or only request parts of the huge reporting template) and therefore the Asset Manager must be prepared and allow enough flexibility in its reporting module to be able to accommodate these new specifications.
(3) Calculation modules
As a sound marketing argument and to facilitate insurance companies’ computation efforts to compile information related to Pillar I on Quantitative Requirements (SCR), Asset Managers might have to implement calculation modules to provide indicative capital requirements forecasts to their clients.
(4) Competitive offer
The Solvency II requirements represent a great opportunity for Asset Managers to offer more competitive services to insurance companies by both supporting insurance companies in their reporting process and offering them more suitable investment solutions to minimize capital requirements. However, cost must be kept reasonable!
The KPMG Racer: a helicopter view with a twist
The KPMG Racer already offers several tailor-made Risk & Compliance services to its clients and a new Solvency II component is currently being added to its structure to enable Asset Managers to tackle this new reporting challenge. By capitalizing on the Data Model already in place for AIFMD Reporting, the Racer will integrate new features to facilitate the reporting process of Asset Managers to insurance companies.
Thanks to its unique structured Data Model, its data enrichment module as well as its classification and computation processes, the KPMG Racer offers the possibility to generate standardized reports based on the “Tripartite Data Exchange Template”.
Moreover, the Solvency II reporting module is a flexible and extendable tool which also allows us to generate client-specific templates in case an Asset Manager receives specific reporting requirements from an insurance company.
Learn more
Have a look at our website to find out more about the KPMG Racer.
