Scyllogis Consulting can provide an end to end solution to managing data in the context of Solvency II from assisting in the development of a data strategy through to setting out options for identifying and implementing the appropriate data management solutions:

• Our consultants comprise of experienced practitioners with expertise in data management and skilled data analysts able to use and deliver cost-effective practical solutions for all data related activities.

• Scyllogis will organise and manage discussions with appropriate stakeholders, facilitating workshops and steering committees.

• Our combined project management and stakeholder management experience is essential in planning and managing the end to end process.

• Through various partner relationships we have access to risk consultants and senior advisors who can help support the application and delivery processes required of programmes in Solvency II.

Solvency II represents an opportunity to not only improve insurers’ operations, but also develop significant competitive advantage in a challenging market

A full version of how Scyllogis can help address the challenges of Solvency II can be downloaded here.

Challenge

Solvency II is the new directive for all EU insurers and reinsurers, aimed at implementing solvency requirements that better reflect the risks that organisations face to deliver a supervisory system that is consistent across all member states. It also represents an opportunity for insurers that will unlock budgets, and that can address risk management in a strategic way. In order to seize the opportunity however, it is critical that insurers adopt an enterprise-wide approach to risk management. The challenge is that the deadline for its implementation, November 2012 is fast approaching. Its impact is expected to be far reaching and extensive across the enterprise. Non-compliance will endanger an insurance company’s right to trade.

But how will Solvency II specifically affect the areas under the control of the CIO – and what should CIOs and their IT departments be doing now to address them? The answer to this question will almost certainly be connected in a large part to the Solvency Capital Requirement (SCR) of Solvency II, as all insurance organisations will need to prove that they have the necessary financial resources.

The calculation of the SCR will drive larger insurance firms to the adoption of an internal risk model, because the standardised approach will be conservative meaning that firms using it will stand at a competitive disadvantage.

Another upside to using this model is that it will take into account the diversification of portfolio or geographical spread and deliver commercially realistic capital adequacy requirements. The downside however, is that internal risk models prove voracious consumers of data and not just in terms of data depth, there are also significant issues in terms of the quality, accuracy, availability and consistency of data.

Solution

The Financial Service Authority (FSA) has already confirmed that the quality and breadth of data held generally by the insurance sector is not sufficient to meet current requirements, let alone the regulatory demands of Solvency II.

All of the well-established principles of business intelligence, data warehousing and data governance apply to Solvency II and a wellknown success factor of such initiatives is the implementation of a robust, enterprise-wide data model reflecting the common processes and product types rather than the existing (legacy driven) data storage implementation.

The three key data management areas that CIOs must start addressing immediately in order to achieve compliance with Solvency II are:

1) Data depth

A key requirement of Solvency II is to hold additional and more detailed policy data, ensuring full traceability to source, that will be subject to ongoing and higher levels of scrutiny by the regulators. This means capturing a greater depth of policy information than ever before, effectively making manual data entry prohibitive from a cost and scalability perspective.

Whilst London Market organisations have done well when collecting financial data, they are not positioned to capture the additional data needed for the risk capital calculation to support the capital adequacy models. For example, the SCR is based on the calculation of the market value of liabilities which is significantly different from the calculation of statutory reserves and requires different data sets. Additionally, this data will come from varied sources.