Why Solvency II May Be an Opportunity for Insurers to Become More Competitive
Even though Solvency II has been on insurers’ radar screens for years, it seems that many enterprises were still playing “catch up” when the January 1st compliance date arrived. A survey by Deloitte shows that half of insurers were still struggling to coordinate infrastructure to get a better handle on risk, capital management, and multiple and disparate forms of data several months into the year.
That’s hardly a surprise when you consider that even before Solvency II, many insurers were already dealing with poor data quality, as well as complex and fragmented system landscapes. Are you one of them?
It’s easy to view Solvency II as a costly and time-consuming regulatory burden. But let’s consider a different perspective: Solvency II presents a real opportunity to revamp outdated IT systems that have been hampering your growth.
Now, I’m not suggesting that you throw out your existing IT systems altogether. Nor should you rely on patchwork solutions to meet requirements.
Instead, you can support growth by adopting a strategic and tactical approach to IT that will allow you to meet two important business goals:
- Remain in compliance with Solvency II, while anticipating that the regulation is likely to change over time
- Improve data management and quality to maintain and grow your portfolio
Let’s take a look at how you can reconfigure your IT infrastructure in a way that gives equal weight to both of these objectives.
A surgical approach to IT
While you may be tempted to deploy a monolithic solution to comply with Solvency II, this approach isn’t without problems. That is, regulations often evolve. Implementing a monolithic application for each new regulatory initiative may result in an extremely unwieldy architecture that is too difficult to adapt.
On the other hand, patchwork approaches may only exacerbate the difficulty of aligning disparate systems and data sources.
Because Solvency II creates a need for more frequent and granular financial reporting, let’s consider how reconfiguring your existing IT infrastructure could also help you to get ready for upcoming new accounting standards. If you can ensure that your accounting data adheres to a consistent model, you can operate with only one layer of data.
Viewing that single source of data in real time, with greater visibility, has several benefits, including:
- Avoiding significant data redundancies
- Creating more timely financial forecasts
- Enable real time analytics and decision making
Solutions for each pillar
At SAP, we have created software solutions that can plug in to your existing systems to answer each pillar of Solvency II.
We address Pillar One’s quantitative requirements regarding assets, liabilities, and capital requirements with the SAP Insurance Analyzer analytic applications. This software helps insurers integrate and synthesize multiple data sources, including those from business partners, legacy systems, and claims systems.
SAP was rated as a “leader of the pack” by Forrester Wave for our solutions that address governance, risk, and compliance relevant to Pillar 2.
We also offer a reporting tool relevant to Pillar 3 requirements for transparency, reporting, and disclosure.
When you view Solvency II as an opportunity, you’ll likely find many ways to leverage the deeper insights you can get from improved data management and real-time reporting. The result? You can ensure compliance with both new and evolving regulations. What’s more, you could gain quite a strategic advantage over your competition.
For more information, please visit SAP for Insurance.