In a softening market, insurers tend to reign in IT spending. However, until now, insurers operating in the European Union were never asked to lay bare the mechanisms they use to account for risk. So, as the date of being compelled to account for their innermost workings nears, European insurers are reaching for their wallets.
A new report from Boston-based
While Solvency II will not impact U.S.-based insurers directly, its implications may well ripple across the Atlantic as insurers here beef up risk management systems in order to remain competitive in the global marketplace. Indeed, whether required by law or not, a better understanding of risk is vital for insurers. To achieve a more holistic view of risk throughout the enterprise, investment in new analytical tools available on the market could help in reaching more accurate and sophisticated risk calculation and simulation, Celent says.
“Even though insurers have to adapt and consider heavy IT investments in the next years, Celent believes that IT adjustments required by Solvency II should not be seen as a new burden but more as an opportunity,” the report, authored by Nicolas Michellod, senior analyst with Celent's insurance group, states.
Celent says insurers should tackle Solvency II head on and focus on aligning their IT architecture, treating data as a strategic asset, enabling advanced IT risk management tools and promoting frictionless communication.
Michellod says insurers still working with fragmented platforms should consider altering their risk management systems.
“With the emergence of Solvency II, risk management functions will have to be incorporated into an integrated system supporting analysis across different risk types and facilitating strategic decision-making,” he writes. “At present, many insurers have dedicated risk functions for each type of risk: insurance risk, market risk, liquidity risk, credit risk and operational risk in place. This fragmentation prevents transparency and relevant information flow between the important actors of the decision-making process, notably executive board members and CROs.”
Sources: Celent, INN archives
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