Dear,
As you probably know, since January 1st 2016, all the European insurance companies must be compliant with the new Solvency II Directive. Additionally, on January 1st, 2021 becomes effective the new Accounting Standard IFRS 17 for Insurance Contracts.
The European Union Solvency II Directive represents a major change in the insurance industry regulation. The Directive's main priorities are increasing the solvency of the Insurance companies and harmonizing the EU regulation, with the final objective of achieving a solvent and single EU insurance market.
From some perspective, the Solvency II regulation represents to the insurance companies what the Basel III and the EU Bank Recovery and Resolution Directive represents to the European banks.
This is a major challenge on the Information Systems of the Insurance companies, just for giving you an idea of the complexity of implementing these regulations, we must consider that the final implementation date has been delayed 4 years from the initial proposals. Initially, regulators looked at October of 2012 as the implementation date.
Among many other changes, implementing Solvency II has requested the creation of the European Insurance and Occupational Pensions Authority (EIOPA) that, with more competencies, replaces the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS).
The Solvency II Directive is structured in three main areas or Principles.
- Pillar 1 establishes the quantitative models which must prove that the insurance company has the capacity to fulfill its obligations, like determining the capital requirements.
- Pillar 2 sets out requirements for the governance and risk management framework that identify and measure the risk to which the insurance company is exposed, and the supervision model.
- Pillar 3 focuses on disclosure and reporting of the company risk exposures and capital requirements.
For helping insurance companies to meet with the Solvency II and IFRS 17 regulations, SAP has delivered the SAP Financial Products Subledger and Solvency 2 Ssytems.
Technically the SAP FPSL system is an evolution of the Bank Analyzer system, it's also built following the principles of the Integrated Financial and Risk Architecture, providing the full potentiality of the Financial Database.
As Bank Analyzer, the SAP FPSL System provides two groups of functionalities or modules.
- SAP Accounting for Insurance Contracts, equivalent to the Accounting for Financial Instruments module of Bank Analyzer.
- Solvency Management for Insurers, equivalent to the Credit Risk Analyzer (Basel III) module of Bank Analyzer.
And as in Bank Analyzer, the Insurance Analyzer System is also structured in 4 Layers.
- Source Data Layer.
- Processes and Methods Layer.
- Results Data Layer.
- Analytical Layer
The final objective of this 4 Layer Architecture is providing a single source of truth for Accounting, Risk and Liquidity Information
As it happens with the banks, in which sophisticated reporting tools have to coexist with non-integrated, heterogeneous operational systems, often supported by manual processes and non-integrated spreadsheets, it's going to take years before the insurance companies are fully compliant with the Data Governance requirements of the new regulation.
During this transition, the Data Governance capabilities of the 4 Layers, Integrated Financial and Risk Architecture of Insurance Analyzer will be a great help.
On the Source Data Layer, we can integrate all the data, provided by heterogeneous legacy systems, in an homogeneous Data-model of Master, Operational and Market Data.
For Instance.- Many insurance companies lack on an integrated vision of their customers data. Customers data is spread among legacy systems with very limited integration with each other, which is a root cause for undetectable fraud and inaccurate risk management.
With SAP FPSL, the insurer company can integrate in the Source Data Layer all these divergent versions of their Customer data in a single and integrated repository, building the foundation for customer-centric analysis of profitability and risk management.
Transforming the whole landscape of an Insurance company will represent an enormous effort of systems migration that will require much of the company resources. Without the integrated risk & accounting vision of Insurance Analyzer, it's not possible to align the IT strategy on the direction of the new requirements of Solvency II and IFRS 17, which are going to be the main concern for the IT executives of the industry in the oncoming years.
At the end, the stability of the insurance industry is not just a European issue, the global industry is facing major challenges, as it moves to a model driven by efficient management of Capital, and very sensitive to risk management.
Join the SAP Banking Group at: http://www.linkedin.com/e/gis/92860
Looking forward to read your opinions.
K. Regards,
Ferran.
www.capitency.com
Join the SAP Banking Group at: https://www.linkedin.com/groups/92860
Visit my SAP Banking Blog at: http://sapbank.blogspot.com/
Let's connect on Twitter: @FerranFrancesGi
Ferran.frances@capitency.com
As you probably know, since January 1st 2016, all the European insurance companies must be compliant with the new Solvency II Directive. Additionally, on January 1st, 2021 becomes effective the new Accounting Standard IFRS 17 for Insurance Contracts.
The European Union Solvency II Directive represents a major change in the insurance industry regulation. The Directive's main priorities are increasing the solvency of the Insurance companies and harmonizing the EU regulation, with the final objective of achieving a solvent and single EU insurance market.
From some perspective, the Solvency II regulation represents to the insurance companies what the Basel III and the EU Bank Recovery and Resolution Directive represents to the European banks.
This is a major challenge on the Information Systems of the Insurance companies, just for giving you an idea of the complexity of implementing these regulations, we must consider that the final implementation date has been delayed 4 years from the initial proposals. Initially, regulators looked at October of 2012 as the implementation date.
Among many other changes, implementing Solvency II has requested the creation of the European Insurance and Occupational Pensions Authority (EIOPA) that, with more competencies, replaces the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS).
The Solvency II Directive is structured in three main areas or Principles.
- Pillar 1 establishes the quantitative models which must prove that the insurance company has the capacity to fulfill its obligations, like determining the capital requirements.
- Pillar 2 sets out requirements for the governance and risk management framework that identify and measure the risk to which the insurance company is exposed, and the supervision model.
- Pillar 3 focuses on disclosure and reporting of the company risk exposures and capital requirements.
For helping insurance companies to meet with the Solvency II and IFRS 17 regulations, SAP has delivered the SAP Financial Products Subledger and Solvency 2 Ssytems.
Technically the SAP FPSL system is an evolution of the Bank Analyzer system, it's also built following the principles of the Integrated Financial and Risk Architecture, providing the full potentiality of the Financial Database.
As Bank Analyzer, the SAP FPSL System provides two groups of functionalities or modules.
- SAP Accounting for Insurance Contracts, equivalent to the Accounting for Financial Instruments module of Bank Analyzer.
- Solvency Management for Insurers, equivalent to the Credit Risk Analyzer (Basel III) module of Bank Analyzer.
And as in Bank Analyzer, the Insurance Analyzer System is also structured in 4 Layers.
- Source Data Layer.
- Processes and Methods Layer.
- Results Data Layer.
- Analytical Layer
The final objective of this 4 Layer Architecture is providing a single source of truth for Accounting, Risk and Liquidity Information
As it happens with the banks, in which sophisticated reporting tools have to coexist with non-integrated, heterogeneous operational systems, often supported by manual processes and non-integrated spreadsheets, it's going to take years before the insurance companies are fully compliant with the Data Governance requirements of the new regulation.
During this transition, the Data Governance capabilities of the 4 Layers, Integrated Financial and Risk Architecture of Insurance Analyzer will be a great help.
On the Source Data Layer, we can integrate all the data, provided by heterogeneous legacy systems, in an homogeneous Data-model of Master, Operational and Market Data.
For Instance.- Many insurance companies lack on an integrated vision of their customers data. Customers data is spread among legacy systems with very limited integration with each other, which is a root cause for undetectable fraud and inaccurate risk management.
With SAP FPSL, the insurer company can integrate in the Source Data Layer all these divergent versions of their Customer data in a single and integrated repository, building the foundation for customer-centric analysis of profitability and risk management.
Transforming the whole landscape of an Insurance company will represent an enormous effort of systems migration that will require much of the company resources. Without the integrated risk & accounting vision of Insurance Analyzer, it's not possible to align the IT strategy on the direction of the new requirements of Solvency II and IFRS 17, which are going to be the main concern for the IT executives of the industry in the oncoming years.
At the end, the stability of the insurance industry is not just a European issue, the global industry is facing major challenges, as it moves to a model driven by efficient management of Capital, and very sensitive to risk management.
Join the SAP Banking Group at: http://www.linkedin.com/e/gis/92860
Looking forward to read your opinions.
K. Regards,
Ferran.
www.capitency.com
Join the SAP Banking Group at: https://www.linkedin.com/groups/92860
Visit my SAP Banking Blog at: http://sapbank.blogspot.com/
Let's connect on Twitter: @FerranFrancesGi
Ferran.frances@capitency.com
