The impact of Solvency II on data management in insurance
The Luxembourg insurance industry has been under the ever-growing pressure of regulations such as Solvency II. In a nutshell, Solvency II impacts the way insurance companies manage their risks and has consequences across the entire company, e.g. capital, governance, processes and systems.
Consequently, data is an important and wide-ranging topic in Solvency II. Furthermore, data is directly targeted by Solvency II, as it is required to be accurate, complete and appropriate—not to mention traceable. Unarguably, this is easier said than done: especially as the regulators will most likely impose strict penalties. For instance, insufficient data quality will result in an insurer being
forced to build and maintain additional capital in order to provide a cushion in the event of errors in the calculation of capital requirements. As a result, the prerequisites for meeting the Solvency II requirements are data governance and data control.
Most insurers are facing the same challenges. Actuaries and risk managers often use a mix of IT extracts from heterogeneous operational systems and various business-managed end-user computing files, causing reconciliation challenges, knotty problems and many other issues. Many manual adjustments are performed,
often in a decentralised form, causing important losses of traceability. Data quality checks—when performed—are usually informal and data is not stored in consistent sets, making the reuse of a given input set extremely difficult. Furthermore, insurance companies have to contend with increasingly heterogeneous data sources, both internal and external, and given both data pushing and pulling.
Inside magazine issue 1 – June 2013
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