Preparation for Solvency II looms large on most insurers’ agendas as a major priority. It requires insurers to calculate their capital, assets and liabilities and to implement comprehensive risk management processes and systems.
Designed to harmonize the regulatory regime across the European Economic Area, Solvency II was formally approved in May 2009 and is due to be implemented by January 2014.
However, while Chartis detects a growth in confidence in the management of the Solvency II process it is not without its issues. These include its complexity, lack of clarity from the regulators, the cost of implementation and the tight timetable. There are still many technical issues to be resolved before its final implementation.
In particular, the IT challenge for insurers is greater than that of Basel II for the banks. Insurers’ IT infrastructure tends to be more dated than that of the banks and the modeling and data requirements for Solvency II are more complex than for Basel II.
However, Chartis believes that despite the challenges, implementation of Solvency II should be viewed by insurers as an investment for the long term rather than simply a box ticking exercise designed to comply with the regulations. Insurers can take the opportunity to create an enterprise-wide risk management system with a consistent data platform and good quality risk and finance information to support informed decision making.
Currently the technology market for Solvency II is relatively immature. However, Chartis believes that over the next few years investment in research and development and M&A activity will result in more holistic product offerings in the market place. Chartis forecasts that the Solvency II technology market will grow to $1.67 billion by 2013, up 8% from $1.5 billion in 2012.
Chartis has identified some lessons learned by the successful vendors in the Basel II market that are also relevant for Solvency II. These are:
• Engage with early adopters
• Focus on data model and data management
• Establish scalable sales and marketing channels
• Segment the market
• Plan for implementation
• Invest in in-house domain knowledge
This report is an update to Chartis’ 2010 Solvency II Technology report. As well as exploring the Solvency II business and technology requirements of insurers, it also covers the competitive landscape and looks at the leading vendors. These include: Algorithmics, Avanon, Barrie & Hibbert, IBM OpenPages, Kamakura, Mega, Methodware, Milliman, Moody’s Analytics, QRM, SAS, SecondFloor, Solvexia, SunGard, Towers Watson, UBS Delta and Wolters Kluwer.