Warning: Before reading on, I do not profess to be competent in the fine art of anything dance related. However, during a ten week assignment in Dallas I had the opportunity to witness the local dance style of the Texas Two-Step; that experience reminded me of how Risk and Finance must cooperate within the Insurance market today. For those that are not familiar with the dance style, when performed properly, it is a country western dance by two partners who create a smooth, fluid motion in unison to the music. In one of the larger venues I visited, there were hundreds of partners moving in a seamless rhythm to the beat (everything’s BIG in Texas). And that is the picture that comes to mind when I think about how Insurers must smoothly manage the intricate balance of Risk and Finance…and here’s why.
Today, it is more critical than ever for risk and finance to come together in a unified view in order to best achieve corporate, regulatory and stakeholder objectives. These disciplines have been wedged together as a result of the evolving legal and accounting rules as directed by IFRS4 and the EU Insurance Solvency legislation. Compliance with these emerging standards requires quantitative and qualitative reconciliation across systems, accounting principles and risk approaches…no easy task. To accomplish this goal, Insurers must connect their various applications, including actuarial, claim management, reinsurance reporting, asset, and policy administration systems. Fortunately, a solution has been developed recently which will deliver a platform (dance floor, so to speak) for integrating risk and finance management.
About a year ago the SAP® Insurance Analyzer was introduced, an analytical application which offers a cost-effective foundation for integrating risk and finance management, with preconfigured business content. The solution acts as a central platform for connecting transactional systems, actuarial engines, general ledgers and reporting systems. Solvency capital requirements can be calculated, and valuation processes are available as the cornerstone for further reporting needs (read why New York Life selected the Insurance Analyzer here). The need for such an innovative approach to efficiently consolidate risk and finance was so important that SAP recently commissioned IDC to create a study on this topic.The research is now available here.
So, it’s time for the Heads of Risk and Finance to work together seamlessly, easily and gracefully. And maybe they can even put on their dancing shoes and try a little Texas Two-Steppin!