Ruediger Lambrecht, senior manager and product owner for ABACUS/Solvency II, BearingPoint, discusses the lessons from Solvency II reporting and the challenges that lie ahead
What was your experience of regulatory reporting last year?
More than 200 entities in 21 countries across Europe used our ABACUS/Solvency II solution to successfully complete their "Day 1" and quarterly Solvency II reporting. We were very pleased with this, as it was an important milestone for our clients.
The run-up to the reporting deadline over the last years was not what we usually see in projects. There were lots of ups and downs, most notably when many insurers took a break from preparations in 2012-13 while they waited for a decision from the European Commission on the Solvency II implementation date. It was challenging for insurers, but also for regulators. Our sister product ABACUS/Regulator is used by some regulators for collecting data and we observed that regulators had similar challenges getting their IT systems ready.
How are you helping insurers with other reporting requirements?
Ireland and France have national-specific templates that must be submitted in XBRL and our system provides for those. There is also the flexibility to produce internal reports for analysis by management and for narrative reports. For example, it is possible to set up a dynamic link between the data from the templates into the Regular Supervisory Report or the Solvency and Financial Condition Report.
Is the industry ready for the first round of annual reporting this year?
It will be challenging in terms of resources, but also in dealing with the extra complexity. For most insurers, only 10 to 14 templates are needed each quarter, but there are many more templates in the annual report – up to around 90 for the regulatory supervisory reporting (RSR). So there is more data to be submitted and often it is at a more granular level than before. With that, there is all the work around data quality management. There is a lot of effort being put in to make sure the deadlines are met.
Aside from the annual reporting, what will be the other challenges this year?
I see three things, depending on the type of firm. First, there are insurers that have a solution they are happy with and would like to continue using. For most of those, they want to bring their project to an end and transfer everything to business-as-usual operations. They want to improve the levels of automation to become more cost efficient, so they need to think about how can they establish - or improve – the appropriate processes.
Second, there are firms using tactical solutions. They have the challenge of finding a strategic long-term solution. Third, there are the estimated 1,000+ users of Eiopa's Tool for Undertakings (T4U). Eiopa will end development of the T4U this year, so they will need to find a new tool.
Finally, everyone will need to think about improving their data quality management. Having achieved the initial reporting, we expect regulators will take a closer look at data quality and will be less forgiving on missing, wrong or inconsistent data.
Why should the firms with tactical solutions switch to a strategic solution?
Simply put, strategic solutions are future proof. They allow you to fulfil the current needs and provide the flexibility to cover future requirements and the automation that enables cost optimisation. By partnering with a suitable vendor, users will get a stable, reliable solution with support for new requirements. In most cases, strategic solutions do require a bigger upfront effort to implement them. But our experience, and the feedback from our clients, is that it definitely pays out in the medium and long term.
What are you doing for T4U users?
Our solution has been designed as a modular solution, suitable for large multinational insurers as well as for mid-sized and small insurers. Given the specific needs of current T4U users, we designed a tailored Abacus solution that simply preconfigures the functionality and the scope to the typical needs of small insurers. A big success of T4U was that it was developed by Eiopa, free of charge to insurers. However Eiopa did not offer regular support. We offer competitive pricing, continual support for day-to-day activities, regular updates in case of regulatory changes and maintenance. Eiopa will be issuing two XBRL taxonomy updates per year and it is important insurers keep up with those changes.