BearingPoint’s survey of 15 European insurers reveals industry lacks firmwide financial and risk reporting strategy crucial to acting as a breakwater against the regulatory tide.

Dublin, November 21, 2014 – Regulatory authorities, investors and other stakeholders are demanding more transparency from insurance companies, but findings from a BearingPoint survey of the industry showed that most European insurance companies are not equipped to comply.  

A study of 15 European insurers to assess how they are dealing with the new regulatory requirements of Solvency II, IFRS 4 and IFRS 9 found that most would like a common, integrated approach to be able to react effectively and sustainably to the new reporting standards.

But the study showed that legacy systems, processes and organisational barriers are proving too difficult to overcome to build an integrated finance and risk architecture that serves as the starting point to successfully manage steadily evolving regulatory and legal requirements.

Just 7% of the interviewed insurers are addressing the requirements in an all-embracing, integrated way.

BearingPoint found that department-specific assignment and handling of reports promotes a silo mentality that hinders a company-wide understanding of regulations and their effects, and impedes financial and risk reporting – putting businesses at risk of unintentionally falling foul of regulation.

Key findings: 

  • Approximately 45% of those interviewed have not undertaken a pre-study for IFRS 4 or for IFRS 9
  • Supporting systems like accounting, controlling, consolidation and reporting are generally centralised (80%)
  • For actuarial tasks including modeling, only 35% use a central platform
  • 85% of the insurers see the provision of data at the level of detail required by the regulator as the biggest challenge

With the growing tide of regulatory requirements and time pressure to comply insurers have to fundamentally change their finance strategy and their business processes and IT systems. 

Insurers underestimate the importance of an integrated finance and risk architecture

Given their current finance and risk architecture, 85 percent of the insurers see the provision of data at the level of detail required by the regulator as the biggest challenge.

Half of interviewed companies aim to restructure their reporting databases. Only a quarter of participants have an implementation strategy for the desired changes and only a few insurers have conducted an all-embracing end to end analysis so far.

The study proves that companies have identified the need for an all-encompassing strategy, however most companies underestimate the impact of the lack of a 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 inter-dependencies 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.

Patrick Maeder, firmwide leader of the Insurance segment at BearingPoint

The variety of outdated reporting tools and IT systems also increases the difficulty of an inter-disciplinary approach.

Currently, most insurers lack a central reporting database, which provides efficient data transfer with harmonised processes and a standardised interface to authorities for a smooth transfer of data.

Furthermore, the majority of insurers struggle with processing times within their actuarial and (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 Analyser & Transformer – BEAT – Box. Core to this method is an inter-divisional, standardised methodology of analysis supporting group-wide reporting requirements. This tool and methodology is parameterised and can be adapted or extended to take into account specific client needs or changing regulatory requirements.

This enables clients to react rapidly and effectively to the changing framework and to drive synergies across the strategy, processes, methodology and IT landscape.

I would advise insurance companies to seriously consider an end to end analysis of reporting requirements across Solvency II, IFRS 4 and IFRS 9 and look to an integrated finance and risk architecture to drive synergies and improve their current ability to react rapidly and effectively to the changing regulatory framework

Martin McKenna, UK & Ireland leader for the Insurance segment at BearingPoint

About the survey

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. 

Read more: Finance Transformation 3.0: Coping with increasing regulatory controls under Solvency II and IFRS 4/9

About BearingPoint

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 organisations. 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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