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The challenges of Solvency II compliance

Russell Ironside
Russell Ironside
PRS Propositions Manager

Solvency II presents compliance teams with a unique set of challenges, but the right data, technology and insights can empower industry players to meet their obligations with accuracy and efficacy.

  1. Compliance with Solvency II presents the insurance industry with a complex set of challenges that center on being able to manage Big Data at speed.
  2. Trusted data, leading-edge technology and intelligent insights can help insurers meet regulatory obligations and manage change accurately and efficiently.
  3. Refinitiv offers an end-to-end solution, available as independent components, that removes the heavy lifting aspect of Solvency II compliance.

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Solvency II took effect in 2016, introducing new regulatory requirements for European insurance firms.

With the express aim of harmonizing capital requirements and risk management standards for the insurance industry, the Solvency II framework comprises three pillars:

  • Pillar 1 sets out quantitative requirements.
  • Pillar 2 covers the requirements for risk management and internal governance and the details of the supervisory process with competent authorities.
  • Pillar 3 addresses transparency.

While the amended requirements improve customer protection, their complex nature means that insurers are now tasked with sourcing and mapping data for reporting purposes; valuing and classifying assets and liabilities; understanding the constituents of potentially thousands of fund holdings; and creating derived data inputs such as credit quality steps (CQS).

Refinitiv’s Solvency II helps you to meet your regulatory obligations and provides you with the necessary data needed to assess your capital adequacy

Compliance includes contacting each fund to obtain the required data relating to fund constituents, and collating incoming non-standardized data in a timely fashion for quarterly submission to the European insurance regulator, EIOPA.

Solvency II compliance has become a significant headache for many organizations, but it is important to appreciate that the core challenge facing the industry is about being able to manage Big Data at speed.

Meeting Solvency II obligations

Refinitiv provides the trusted data and leading-edge technology firms need to meet their Pillar I and Pillar III obligations.

Moreover, our partnership with FinTech provider WizzInvest further enhances our ability to address Solvency II challenges. WizzInvest brings augmented regulatory expertise to the table and is able to provide intelligent insights into current and future regulatory challenges.

Refinitiv provides non-embargoed fund holdings, or fund look-through data, in a consolidated feed managed by a team of specialists to ensure that accurate fund constituents are sourced and aggregated for subscribers. Look-through enables insurers to gain valuable insights into their asset portfolios, and boosts their ability to mitigate the risk exposure of their investments.

We offer comprehensive regulatory-specific pricing and reference data — including CIC, LEI and branch level ratings — and provide everything necessary to meet quarterly reporting obligations. Our professional services software capability combines full holdings data with pricing, reference and client proprietary data to populate the industry-recognized Tri-Partite Template (TPT) report for submission to EIOPA.

A solution tailored to clients

Our end-to-end solution has been structured in three separate components. These can be utilized separately, or combined, depending on client needs:

  • Stage 1: Fund holdings/constituent data
    We liaise with all relevant fund managers, obtain and standardize all holdings information in a timely manner, and send the constituent data back to the client via secure FTP.
  • Stage 2: Data enrichment
    DataScope Select, our strategic data delivery platform, enables the retrieval of a variety of different data components — including referential data, pricing data, entity information, and analytics — to produce an enriched holdings file.
  • Stage 3: TPT creation
    Refinitiv Professional Services works with clients to combine client proprietary data with the enriched holdings data mentioned above. The result is consolidated output data that can be used to populate the TPT in the required format for submission to EIOPA.

Adopting a proactive approach

As companies strive to meet new and/or amended regulatory obligations, such as Solvency II, they also need to remain cognizant of containing costs and protecting operational efficiency.

This can quickly become a complex juggling act. However, by choosing the right partners, companies can develop a smooth and effective response to changing regulatory demands.

Refinitiv removes the heavy lifting from Solvency II compliance, but also delivers additional benefits. For example, our evaluated pricing team covers illiquid and hard-to-price assets.

Furthermore, as of January 2020, EIOPA is using Refinitiv as its source for Risk-Free Rate (RFR) term structures. Therefore, firms taking their underlying data directly from Refinitiv benefit from a four-day time advantage.

Managing regulatory change and remaining ahead of a dynamic regulatory curve can present a range of complex challenges. However, by adopting a proactive approach, forward-looking firms can remain compliant and meet their obligations with accuracy and efficacy.

For more details, access the Refinitiv Expert Talk — Solvency II: Targeted solutions for complex data challenges.

Refinitiv’s Solvency II helps you to meet your regulatory obligations and provides you with the necessary data needed to assess your capital adequacy

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