Zurich, October 31, 2014 – Regulatory authorities, investors and other stake holders are demanding more transparency from insurance companies. Due to the growing tide of regulatory requirements, insurers have to fundamentally change their finance strategy, their business processes and IT systems, but too often they do not have enough time for the necessary process stabilization. Against this background, the management and technology consultancy BearingPoint has interviewed leading insurance companies to determine the industry-wide status quo with respect to regulatory measures and the subsequent impact on practice. The study found that a silo mentality inhibits a company-wide appreciation of regulations and their effects, and therefore constrains financial and risk reporting.
Insurers underestimate the impact of a missing finance and risk architecture on their reporting processes
Half of all interviewed companies aim to restructure their databases. Simultaneously, 85 percent of the insurers expect the provision of data and the corresponding level of detail to be the most challenging part of their finance and risk architecture. Further optimization approaches are identified within the evaluation process. Only a quarter of participants have a strategy for implementing the desired changes. Few insurers have conducted an all-embracing analysis so far.
“The study proves that companies have identified the need for an all-encompassing strategy, however most companies underestimate the impact of missing finance and risk architecture on their reporting processes. They are not able to deal with the topics with an inter-divisional view, which crucially takes into account the interdependencies and synergy potentials between Solvency II, IFRS 4 and IFRS 9. Temporary delays of particular provisions have increased reluctance on the part of insurers. This decelerates the development and can cause serious consequences for the companies involved,” says Patrick Maeder, firm-wide leader of the Insurance segment at BearingPoint.
Differing and outdated systems complicate the realization of synergies
According to BearingPoint’s survey, insurers aim for synergies that arise from a combined handling of Solvency II, IFRS 4 and IFRS 9. This is also the basis for an efficient implementation of further regulatory requirements. However, the current situation clearly does not conform with the desired status. Only seven percent of the interviewed insurers are handling the requirements in an all-embracing, combined way.
The variety of outdated reporting tools and IT systems also make an inter-disciplinary cooperation difficult. Currently, most insurers lack a central database, which includes an efficient data transfer as well as harmonized processes and a standardized interface to authorities for a smooth transfer of data. Furthermore, the majority of insurers struggle with processing times within their actuarial as well as (mostly inflexible) legacy systems, which are not suited to deliver the proper valuation data.
In order to close this gap, BearingPoint has developed a 3-stage analysis tool, the BearingPoint Analyzer & Transformer – BEAT Box for short. Core to this method is an inter-divisional, standardized methodology of analysis including the various group-wide reporting requirements. Depending on the client’s needs or a change in requirements, the method can be extended and the parameters set to embrace an overall context. Companies can react rapidly and effectively to the changing framework and collaborate in terms of strategy, processes, methodology and IT landscape.
Survey participants included a total of 15 European insurers of which 87 percent are listed on the stock exchange. The study focused on the most important core drivers of the insurance industry: Solvency II, IFRS 4 and IFRS 9. For qualified results, interviews were conducted with project, department and division managers, whose tasks are closely related to IFRS 4, IFRS 9 and Solvency II topics. The study is available at: Finance Transformation 3.0: Coping with increasing regulatory controls under Solvency II and IFRS 4/9.
BearingPoint consultants understand that the world of business changes constantly and that the resulting complexities demand intelligent and adaptive solutions. Our clients, whether in commercial or financial industries or in government, experience real results when they work with us. We combine industry, operational and technology skills with relevant proprietary and other assets in order to tailor solutions for each client’s individual challenges. This adaptive approach is at the heart of our culture and has led to long-standing relationships with many of the world’s leading companies and organizations. Our global consulting network of 9200 people serves clients in more than 70 countries and engages with them for measurable results and long-lasting success.
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