Solvency 2 date are likely to postpone to Jan 2016 and it show slow legislative policymaking but what impact it will create for IT sector which working relentlessly for its pillar 3 requirement. Preparing for Solvency 2 required a lots of calculation for insurer. Calculating their asset, liability and capital to have control over risk management.
From Basel II, IT Sector has taught several facet to Bank’s IT department and Solvency 2 is similar compliance requirement. The Complexity of Modeling, Scenarios and Stress Testing is quite high for Solvency 2 comparative to Basel II. Insurer Companies shouldn’t consider this as obligation and justify an IT Solution for sake of it. It required a Strong Data Control from vendor or within organization which not only suffice the regulatory requirement but also provide strong modeling for Risk Assessment.
It might look that talking about Solvency 2 at this stage is too late but the point here I want to make is during 2011-12 lots of Technical Solution surfaced for Solvency 2 Pillar 3 Reporting requirement. Market witness Ready to go solutions which provide quick installation and generating report as per Quantitative Reporting Template (QRT). Software expenditure has increased 16% from 2012 to 2013
Even SAP also provided RDS (Rapid Deployment Solution) for Solvency 2 and partner with some large consulting firm. Overall idea is to have quick implementation in almost fixed Price and Fix time mode.It is a nice product and will benefit insurance company both compliance and Risk management perspective. While working on Solvency Project for last 2 year I realized that most of big Insurance Company either avoid or failed with Quick Fix Starter Kits and relied more on traditional ECC system with lots and lots of customize programme. I essentially feel add on part (e.g. Solvency KIT) is normally only useful if company has a standard financial report system which comprised of most of the best practice else it is burden on the IT side and hardly provide value to end user in long run. It may benefit IT and Consulting Company to churn out money but it also pushing ERP into legacy mode .The success of any quick implementation for Compliance or any other perspective lies in standardization and making Client understand to have uniform system and best practices.
Because of continues slippage from Regulatory side create a lot of hue and cry on IT investment and increasing Risk of requirement closure and for quick profit lots of immature product were launch in the market. It is the same story happened for Basel 2 Technology market.
It would be beneficial for Both Insurer and IT firm to established a strong Frameworks and provide real business value along with Adapting Compliance requirement.