Solvency II is not the only regulatory challenge insurers must prepare for. Insurers need to also factor in the proposed new international financial reporting standards under IFRS 4 Phase II.
Streamlined information technology systems and effective data management are core components of a Solvency II implementation initiative and key to the success of any business-driven program.
Industry activity over the last 18 months has demonstrated that insurers recognize the importance of data quality in achieving Solvency II. Given the time pressures and broader change agenda, it is clear that data quality requirements continue to represent a major challenge and risk to many insurers' ability to meet compliance deadlines.
IFRS 4 Phase II and Solvency II
IFRS 4 Phase II and Solvency II have many technical similarities. However, contract boundaries, discount rates, risk margins and the residual margin represent significant areas of potential differences between them, creating the need for solution blueprints to be adaptable to provide leverage opportunities.
Since Phase II is likely to commence at a later date, data and system solutions for Solvency II will need to be validated against this new reporting standard to avoid expensive re-tooling when Phase II does commence.
All of these factors must be addressed when developing an IT strategy. A single platform solution should not be considered without checkpoints for future developments.
In this article, we take a closer look at: