European Insurers Face Challenges to Solvency II Compliance

European insurers are racing to meet Solvency II requirements by the January 1, 2014 deadline, and many are facing a stiff head wind, particularly with respect to their reliance on third parties for data, the sophisticated risk modeling requirements and the difficulties associated with obtaining sufficiently detailed fund data.

More specifically, a new study by BNP Paribas Securities Services and InteDelta found that insurers are facing key challenges around:


Risk governance. More than half (57 percent) of the insurers surveyed reported high or medium exposure to third-party data providers. As BNP Paribas Securities Services points out, adopting dedicated data work streams within their overall Solvency II programs will build a clear view of critical external dependencies for data sourcing and risk reporting.


Data provision. 80 percent of those polled identified affiliated and third-party fund managers as key data dependencies. Many are concerned about securing granular data for complex products and fund of funds. In addition, they worry about meeting increasing requirements for risk modeling and securities services providers.


Establishing a risk team. A fully-functioning risk team can ensure risk management is embedded at all levels and day-to-day processes and is now considered critical to improved business management.

"New data traceability processes, additional data governance and new criteria for mandate reporting were all identified as being of critical importance to insurers. Yet, each of these appears challenging for some insurers that hold assets with third party managers, or those that hold externally-pooled funds requiring look-through reporting," said Maxime Gibault, head of insurance companies at BNP Paribas Securities Services. "What is clear is that insurers must re-engage with their asset managers over Solvency II in order to be compliant by 1 January 2014."