How is the general market situation for insurers and regulators at the moment regarding the go-live of Solvency II?
Patrick Maeder: BearingPoint currently is conducting a survey among 300 European insurance companies on the implementation status of Solvency II in their companies. According to the first results, the majority of insurers have the perception that everything is going well and are confident that they will comply with Solvency II requirements. Three-quarters of interviewed insurance companies mentioned that they feel confident to provide all the detailed information requested by Solvency II. 88 percent of the insurers that answered the survey until now expect their company to be ready for Solvency II by January 1, 2016. However, 56 percent say at the same time that they still have data gaps, especially for Pillar 3 requirements.
Maciej Piechocki: On the regulatory side there is still uncertainty regarding the implementation of the reporting requirements within the different EU countries. Since each regulator is working independently and at different speeds we see a significant risk that local implementations might differ which in turn would undermine the harmonization and digitalization efforts of EIOPA. This would lead to unforeseen adjustments that might be critical in terms of the timeline. It is not clear yet in all of the countries whether they use XBRL or an alternative format for the submission of the reporting data for Pillar 3. Also how their data collection systems will work remains an open issue. While the underlying assumption is that most regulators will select XBRL as the remittance format, many are underestimating the challenges related to large data volumes and the complexity of the XBRL standard.
This seems like a contradiction – on one side the confident insurance industry, on the other side the uncertainties which come from the status of the regulators. Is it like this and what are the consequences?
Patrick Maeder: Indeed this could lead to challenges. Determining suitable timings for the establishment of implementation projects in the field of regulation and accounting is vital. Many changes arise even during the final draft phases, so the implementation framework is actually extremely constricted. Companies are left with little time to react, a lack of an overview of the regulatory and finance landscape and little sense of how it impacts their company and the market overall. Most of the insurance companies have thus not figured out a comprehensive strategy yet and some of the local regulators still cannot give clear guidance yet on how to submit the data.
Maciej Piechocki: We expect local regulators will stick to the EIOPA guidelines. However, we are concerned that this will not happen at the agreed pace across the EU. For example differences in testing the Solvency II submission systems vary dramatically across member states. While some states such as France already allow (or are about to require) XBRL submissions, others have not yet declared reporting formats for submissions.
How does BearingPoint handle these challenges?
Patrick Maeder: BearingPoint's solution ABACUS/Solvency II manages the EIOPA taxonomies providing the undertaking with the latest updates from regulators on time. The software features a robust Pillar 3 relational data model as an input layer, increasing stability and saving undertakings effort where merely QRTs are reformatted. It is important to understand that BearingPoint from the very beginning decided to provide a strategic regulatory reporting platform for undertakings and not merely a tactical QRT Excel to XBRL conversion tool. This drives the total cost of ownership of our approach significantly down, as our customers are not directly exposed to changes in the QRTs, XBRL taxonomies or validations. As BearingPoint regulatory reporting products are used by over 1000 reporting entities across financial services in Europe we are currently observing an interesting movement away from tactical solutions towards comprehensive reporting platforms across the insurance industry.
Maciej Piechocki: At BearingPoint we strongly believe in what we call the regulatory value chain approach. This has several characteristics such as holistic understanding of regulatory data flow from core systems of an insurer to an aggregated risk data analysis at the EIOPA, as well as a mediation role and knowledge exchange between the regulators and regulated entities. Working closely with regulators on the one hand allows us to better understand the challenges for the insurance industry but interestingly helps us better prepare our supervisory customers to Solvency II as we can bring expertise from the industry to projects at central banks and insurance supervisory authorities.
Contact: [email protected], [email protected]
