central silo systems managing the cost of solvency ii implementation

by:Hengju     2019-06-24
How expensive is Solvency II?Well, if the UK Financial Services Authority (FSA) can believe it, the expected cost of new technologies and external consultants required for compliance could exceed $3 billion.This is a huge expense for many European insurers, especially when you think 1 out of 10 is currently not meeting the expected capital requirements.Although the deadline has been delayed several times, European insurers have not avoided Solvency II compliance.But insurance companies can use these delays to identify ways to reduce costs without compromising compliance.For example, there may be no need to overhaul the business system --Strategic Data warehouse purchases and updates to existing applications can achieve the same goal at a lower cost.Here are some tips on keeping costs low: connecting legacy systems and eliminating many of silos's large insurance companies, especially those that have been around for decades, are often plagued by different systems.While there may be one or two central systems that involve most aspects of the business, the size of large insurance companies means that different departments will independently determine their technical needs over time, and continue to buy their own systems.The result is important data in several different systems and databases.This poses a challenge not only for insurers to integrate the data needed to generate Solvency II reports --This also slows internal decision-making.For Solvency II compliance, a one-time replacement of these legacy systems will be an expensive task.Instead, insurance companies can develop a custom interface tool that allows relevant data to be extracted from each system.This should go hand in hand with efforts to improve compatibility between legacy systems.Eliminate Non-The nature of electronic data repositioning the insurance business means that insurance companies collect and store data in a variety of ways, including microfilm, paper, text/flat files and relational databases.In all respects, this is a data-intensive industry, which may only eclipse the banking industry.Non-extraction of informationThe electronic source of quarterly Solvency II reports can be a tedious and time consuming thing.Solvency II compliance team must work with line managers to identify any data that is retained in the organization only on hard copies that do not have corresponding readable electronic records.The data can then be converted into electronic formats that are easily compatible with other systems in the organization.Once physical data becomes electronic, it is much easier to analyze and absorb data from other sources.Transfer decisionAlthough most of the Solvency II framework seems to be stable, we cannot rule out the possibility of significant changes between now and 2013.In addition, Solvency II may be replaced by a better framework in the future, as it is replacing Solvency I.Making such changes to the enterprise's existing technical infrastructure and data warehouse may require complex and extensive re-programming and re-programming.configuration.In some cases, an expensive process may be required-reverse engineering.The main responsibility for achieving these changes often falls on the IT department.However, since IT personnel already take on day-to-day IT duties and are not subject matter experts for insurance or Solvency II, this may delay implementation and push up overall costs.To avoid this, the workflow, process, and data warehouse settings of Solvency II must separate the ability to change business rules from the ability to change programming logic.In this way, business departments can make changes to data extraction, analysis and reporting rules without the need for IT department intervention.Some studies have shown that by reducing the need for IT employees to participate in change, enterprises can reduce the total cost of such changes by up to 50.This is useful not only for Solvency II, but also for insurance companies to be flexible and responsive to changing market conditions.Reduce transparency costs if the Solvency II framework has a major goal in addition to supporting capital requirements, it is to ensure that insurance companies disclose all relevant information.Pillar 2 of Solvency II requires regular evaluation of the accuracy of the internal model.By basing the report generation process on the business rule management system mentioned in the previous section, insurance companies are able to better demonstrate the fundamentals and audit tracking of each critical business decision.This transparency will inevitably win the trust of industry executives and avoid the costly impact of adverse audits.
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