 Steve Latchem, senior vice president of global solutions at Mastek, examines the role that software has to play in improving data consolidation practices ahead of the introduction of Solvency II.
To demonstrate compliance with the forthcoming Solvency II regulations, insurance companies will need to collect and consolidate an enormous amount of information – taken from all sectors of their business – in order to demonstrate that they have enough capital liquidity to cover their level of risk. The aim of such robust risk-management practices is to better protect policyholders and the stability of the financial system as a whole.
However, for firms that regularly use many different kinds of data - everything from handling and dealing through to trading and exchanging sensitive information – problems often arise when several disparate IT systems are used to hold this business-critical data across many different parts of the company.
Inefficient systems like these can make collating the relevant information a complex and time consuming task, yet this doesn’t need to be such a daunting challenge. In many cases, this information can actually be drawn together in a very short time, as long as the appropriate technology is in place and the business is fully committed to addressing this issue head on.
Moving forward, it will become imperative for organisations to improve their data consolidation practices so that they can govern the quality of data that is used to manage risk. To achieve this goal, we recommend that organisations adopt a three stage approach in order to obtain a holistic view of the data that they are using to inform their decisions about risk.
Introduce data warehousing
Firstly, to avoid falling behind other industries, we recommend that life and insurance companies take action now to ensure that all of their data is easily accessible and stored in an auditable way using a strong, scalable data management foundation. A robust data warehousing solution will play a key role in achieving this goal, and will also provide a solution to internal administration pressures, since this approach will ensure that the main source of information is cleaned, transformed, catalogued and readily available for decision making.
Complete a data analysis
The way in which organisations retrieve and analyse their data in order to extract, transform and manage key information is another important consideration for data warehousing systems. To source valuable insights from the data, it is important to layer an analytics tool on top of the information. By introducing systems and processes that analyse rich data sets, organisations can manipulate information to derive valuable insights about the level of risk that is being faced and then use this knowledge to inform future decision making.
For example, business intelligence tools will enable life and insurance companies to undertake a thorough data analysis based on accurate information. This approach ensures that organisations have a better visibility of data and a multi-dimensional analysis so they can measure key metrics and maintain compliance with the new Solvency II regulations. This in turn provides companies with greater control and agility so that information can be shared across different departments, thereby reducing the duplication of data and ensuring that everyone has a single view of the organisation and can identify patterns across the business.
Undertake information mapping
Finally, companies need to design a flexible IT model that is capable of mapping information across the organisation based on the needs of users, so that this group can demonstrate compliance with the Solvency II regulations. By analysing, organising and presenting business-critical data based on business needs in this way, it will be much easier to explain what is occurring within the system and thus to report on compliance more effectively.
With the introduction of Solvency II now just 18 months away, it is imperative that organisations start thinking about the latest set of changes now. Those firms that fail to comply with the new regulations will risk being unable to underwrite new business and as a result could become very closed-book organisations.
Many firms are still underestimating the resources required to comply with Solvency II, and therefore still don’t have the tools in place to undertake such a large project internally. As a result, organisations need to start addressing the challenges associated with achieving strong data governance right now. By introducing the internal processes and systems that that are needed to manage risk and to process this large volume of data effectively, firms will be able to avoid any adverse effects of Solvency II and ensure that they are ready for the 2014 deadline.
|
