Demystifying Solvency II
The global financial crisis has emphasized the critical role of effective...
Understanding Solvency II requirements
The three-pillar approach of Solvency II is aimed at setting standards for measurin...
Preparing to comply with Solvency II
Preparing for Solvency II compliance is a major IT initiative for any insurer. The ty...
Disclaimer: All the documentation and other material contained herein is ...
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Solvency II Offering


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Solvency II Offering

  1. 1. www.thinksoftglobal.com Demystifying Solvency II The global financial crisis has emphasized the critical role of effective risk management and comprehensive governance in the finance industry. Stricter and more intricate regulations ensure that the financial sector remains strong. Solvency II is a European Union (EU) directive that aims at updating and modernizing the regulatory framework by codifying and harmonizing the European insurance regulation. The directive extends to over 30 countries and is considered the largest ever effort to create a single set of rules governing insurer creditworthiness and risk management. US insurers with parent companies in the EU need to follow Solvency II requirements. Similarly, American parent companies with European subsidiaries must meet Solvency II requirements for these subsidiaries. Solvency II is based on three major areas or pillars: • Pillar 1 stipulates the quantitative requirements. • Pillar 2 specifies requirements for the governance, risk management and effective supervision of insurers. • Pillar 3 focuses on disclosure and transparency requirements. Enabling total compliance with Solvency II Thinksoft’s offering for insurers - Rama Warrier and Phani Tangirala Challenging areas Among other requirements, absolute compliance with Solvency II also implies a detailed overhaul and testing of financial applications and making sure the technology front is updated and synchronized with the new risk management approach. Insurance providers must work with a testing specialist to ensure that any new applications integrate seamlessly with the legacy systems and that any enhancements to current applications are performed correctly. Adopting the right approach to manage the Solvency II compliance is also a critical decision for all insurance providers. How Thinksoft can help The insurance practice at Thinksoft has been gearing itself to assist you in your efforts to comply with the Solvency II norms. We feel that following a comprehensive issue-based approach to compliance management is the way forward. An issue-based approach is more logical and is aimed at identifying the objectives behind the regulation. Designing such an approach will help you resolve the issues in a holistic manner, rather than preparing for Solvency II compliance alone. Thinksoft can help you comply with Solvency II in multiple ways. With Thinksoft’s expertise, you can: • Understand Solvency II requirements in detail • Adopt the right information technology model • Prepare to comply with Solvency II • Get expert guidance on Solvency II
  2. 2. Understanding Solvency II requirements The three-pillar approach of Solvency II is aimed at setting standards for measuring and managing capital adequacy of insurance companies operating in the EU region. A risk-based capital (RBC) approach is the concept upon which Solvency II is built. The Three-pillar Approach of Solvency II Pillar 1 Pillar 2 Pillar 3 Quantitative Requirements Supervisory Review Disclosures Valuation of assets and liabilities Internal controls Regulatory reporting Best estimates Enterprise-level risk managemnet Public disclosures SCR / MCR calculation Governance Transparency Standard model ORSA Internal models Implementing Solvency II Finalization of valuation and models ORSA Designing reporting process Designing and testing of internal model Risk management infrastructure Detailing disclosure requirements Data management Internal audit and controls Calculation of MCR / SCR Investment RI planning Solvency council formation Gap analysis and implementation plan Preparing project plan and control Detailed documentation Implementing process and system updation Generic Framework Requirement Specific Adopting the right information technology model A three-layered approach as shown in the diagram below is an appropriate one for Solvency II. The model has been structured around the flow of information. The stack is built with a data layer as the base. The middle tier is the calculation engine with the intelligence to perform the required calculations. The top layer is the reporting tool, which renders the output for internal and external stakeholders. The three-layered stack can receive data collated from different source systems, which in turn receive data from operations. In some cases, you may need to include an intermediate stage of collation and cleansing of data to ensure accuracy and quality of inputs for the Solvency II infrastructure. Information Technology Model for Solvency II Insurance Operations / Investment / Others / Corporate Actuaries Reporting Tool Top Management Internal Audit Compliance Management Regulator Calculation Engine Data Model Data Cleansing and Pooling Source System 2 Source System 3Source System 1 SolvencyInfrastructure
  3. 3. Preparing to comply with Solvency II Preparing for Solvency II compliance is a major IT initiative for any insurer. The typical challenges of a large IT implementation can be anticipated during the initiative. The IT priorities may be split into two focus areas – data and application – for the convenience of considering them in the implementation plan. Ability to cope with complexity is important as the RBC calculations and reporting is expected to evolve over a period of time, with increasing complexity. The IT set-up needs to have the capacity to handle a large volume of complex calculations. Technology needs to be scalable and flexible to ensure that the Solvency II infrastructure blends well with the overall application landscape. The table below outlines a bird’s eye view of activities indicating the areas where Thinksoft can collaborate with you in achieving total compliance. Road map for Total Compliance • Gap analysis • Project planning • Overall project management • Periodic review of progress • Reporting to board / steering committees • Communication campaigns within the organisation • Gap analysis • Project planning and monitoring • Data management » Understanding current data management » Plan for required enhancements for compliance • Documentation of goals, processes, technical requirements etc. • Conceptualizing systems for » Risk management » Internal audits » Governance • IT products / package evaluation and vendor selection • Testing solutions for accuracy Overall data management approach Availability of data Quality check of data Identifying gap in data capture / design methods to capture data Actuarial modelling tools Valuation and other calculation tools Simulation tools Governance of models Risk management system Internal audit and control systems Supporting infrastructure of governance Design of reporting system infrastructure System support for disclosure requirements Technology Activities ReportingGovernanceCalculationData Insurer’s Contribution Thinksoft’s Contribution Getting expert guidance on Solvency II Anticipating your needs, Thinksoft has identified a team of experts with excellent working knowledge of various lines of the insurance business including life insurance, non-life insurance, health insurance and pension. The team has attended many workshops on Solvency II requirements and is specially trained to assist you in your journey to absolute compliance. The key expertise of the team is: • Excellent understanding of insurance business • Detailed knowledge of Solvency II requirements • In-depth understanding of global best practices in business analysis and testing services • Good written and verbal communication skills Partner with us to make your journey to compliance a smooth and successful endeavor.
  4. 4. www.thinksoftglobal.com info@thinksoftglobal.com Disclaimer: All the documentation and other material contained herein is the property of Thinksoft Global Services and all intellectual property rights in and to the same are owned by Thinksoft Global Services. You shall not, unless previously authorized by Thinksoft Global Services in writing, copy, reproduce, market, license, lease or in any other way, dispose of, or utilize for profit, or exercise any ownership rights over the same. In no event, unless required by applicable law or agreed to in writing, shall Thinksoft Global Services, or any person be liable for any loss, expense or damage, of any type or nature arising out of the use of, or inability to use any material contained herein. Any such material is provided “as is”, without warranty of any type or nature, either express or implied. All names, logos are used for identification purposes only and are trademarks or registered trademarks of their respective companies. About Thinksoft Thinksoft Global Services Ltd. is an independent Business Assurance and Testing Specialist working entirely with Financial sector clients in APAC, the USA, Europe, Middle East and India. With a unique business model and a track record of over 12 million person hours, the company has a 750 strong workforce with delivery centers in Chennai, Bengaluru and Mumbai, supported by local offices in New York, London, Dubai, Singapore, Brussels and Sydney. While the company is ISO 9001:2008 and ISO 27001:2005 certified, its Chennai offshore test center is PCI:DSS and BITS-AUP compliant. For more details, visit www.thinksoftglobal.com