Reading tea leaves under a glass ceiling
Solvency II is shorthand for the new set of risk- and capital-management regulations for insurers in the European Union. The current directive calls for companies to adhere to these requirements by 31 October 2012. Among the many changes Solvency II will usher in are adjustments to ways in which insurance companies disclose financial information to both the public and regulators.
In this article, Ernst & Young examines two disclosure requirements: the public-facing Solvency and Financial Condition Report (SFCR) and the private Report to Supervisors (RTS). We also look at the interplay between these reporting requirements and those of International Financial Reporting Standards (IFRS).
Based on our analysis, if they have not already done so insurers must begin work on several projects right away, including but not limited to:
- Prepare master SFCR and RTS templates.
- Assess which current reporting practices can be used for the SFCR, and how the SFCR will influence financial statement disclosures.
- Map the new reporting elements to underlying data processes inside the enterprise.
- Look to minimize added expense by taking full advantage of the overlap between data processes and business processes.
- Understand how they can work with external auditors to adhere to new requirements.
Clearly the changes necessary under the Solvency II regime should be undertaken without delay. Rather than view these as a compliance exercise, however, smart firms are moving now to make this transformation in order to gain any competitive advantage possible.
Reading tea leaves under a glass ceiling.
