Insurers with European operations already should have plans in place to comply with Solvency II’s reporting requirements. But they and many carriers worldwide still need to ensure that their regulatory reporting frameworks are efficient and robust.
Consider that besides complying with Solvency II’s Jan. 1 reporting requirements, insurers also must close their books under many other regulatory regimes. Those include Generally Accepted Accounting Principles, International Financial Reporting Standards and the Market Consistent Embedded Value. In addition, carriers face statistical reporting requirements from the European Central Bank and the international Financial Stability Board. And then there are global capital standards such as Basic Capital Requirements, Higher Loss Absorbency, Insurance Capital Standards and, likely, future changes in Solvency II.
We maintain that because finance, risk and prudential closings essentially are linked functionally, their production processes and organizational definitions should not be walled off in different silos but addressed in a comprehensive, integrated reporting framework. Failing to adopt this system, carriers could jeopardize their ability to achieve and remain in compliance with all of their regulatory demands. But by streamlining production frameworks in an integrated way―with deep functional understanding and knowledge in the IT area—we believe that carriers would avoid compliance issues, as well as improve their overall performance.
As Accenture details in its report, The Insurance Reporting Challenge: Building an Integrated Framework , an integrated reporting framework should cover processes, systems and people dimensions. As carriers embark on this difficult but necessary effort, senior management and boards should answer a few fundamental questions about their existing frameworks. Their responses will help them chart the course ahead in complying with often complex and sometimes conflicting insurance reporting requirements:
- Do your tools fit your business needs, and is your architecture efficient and seamlessly integrated among various systems?
- Are your processes properly designed and understood at the right level by the business teams that need to follow them?
- Is your organization sufficiently equipped in terms of skills, seniority mix, capacity, technology and other resources?
- Is the transformation roadmap clear and correctly phased so that it does not disrupt the production teams?
- Is your overall reporting framework on the right track and progressively improving?
- How do you transition into business as usual and establish a sustainable mode of operation?
In a more operational model, key questions would include:
- Which target are you following to define your end-state insurance reporting process in 2016 and beyond?
- What is the scope of standards, including internal reporting, that you envision?
- Which level of process granularity are you looking at defining? For example, cross-departmental steering vs. internal department needs?
- Which reporting deadlines do you want to meet internally within your group, corporate structure or both?
- How do you coordinate individual and consolidated processes with financial communication expectations?
- How do you coordinate quantitative with qualitative reporting production, such as narrative appendices, regular supervisory reporting for the Solvency and Financial Conditions Report and reference documents?
To learn more, download the Accenture report, The Insurance Reporting Challenge: Building an Integrated Framework.
Next time: Steps in developing an integrated reporting framework.