Solvency II – A Quest for Data Quality [Part 3]

Part III – The Reinsurance System & Solvency II Reporting Cycle

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Over the past few months we have read in the press of both UK, and European Banks performing poorly in the banking stress tests. Whilst we at the LOGiQ3 Group focus solely on the Life Re/Insurance industry, there are close similarities between both industries when it comes to solvency requirements, specifically Basel III and Solvency II.

Fundamentally, the ability to accurately measure and report on your firm’s solvency levels, requires three key interrelated ingredients:

  1. Decent data quality
  2. Active Reinsurance Partners
  3. A high performance Reinsurance system

In my first two parts of this blog series, we looked at the first two ingredients – Data Quality and the Reinsurer. In this final instalment, let’s consider how the reinsurance system underpins the quest for data quality, and plays a pivotal part in the Solvency II reporting cycle.

The Reinsurance System mechanics – simplistically the reinsurance system receives two inputs (treaty terms & conditions and policy administration feed(s)), and produces one generic output (reporting). The reporting will be used both internally (for analysis) and externally, (by reinsurers).

 

Reinsurance System Overview

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Naturally, a system is only as good as its design, and it is entirely reliant on the quality of data that feeds it – garbage in equals garbage out! Aside from these two constraints, a reinsurance system can play a major role in a firm’s solvency II model.

In our opinion there are three major contributory areas:

  1. Data Quality

Improve the quality of data flowing through your business through:
  • Automated validation of reinsurance premiums and risk limits,
  • Automated compliance with reinsurance treaties terms and conditions.
  • Standardised reinsurance data (see below).
  1. Data Standardisation

An effective reinsurance system can create operational efficiencies by:
  • Consolidating many legacy policy administration systems into one single reinsurance system and data format.
  • Greatly improving data accuracy by having a single reinsurance system and data format.
  • Reducing reinsurer investigations / rectifications through improved data quality. Ultimately saving time and money for both the ceding insurer and reinsurers.
  1. Risk Management

Optimise your firm’s risk management through:
  • Risk aggregationcreate a single view of your organisation’s risk retention (many legacy policy admin feeds into one reinsurance system).
  • Automated retention management.
  • Risk monitoring & management actions – providing access to real-time high quality data for activities such as claims and persistency monitoring.

Solvency II Reporting

Finally, to close the loop on our ‘Quest for Data Quality’, let’s consider the pivotal role the reinsurance system plays driving data quality in the Solvency II reporting cycle.

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Fundamentally, quality data is the life blood of Solvency II. Selecting the correct reinsurance system to partner your business with will:  

  • Drive rich quality data through the veins of your organisation.
  • Create operational efficiencies, which in turn creates opportunities for competitive advantage.
  • Will create the backbone to your Solvency II Compliance and Reporting.
  • Maintain a healthy insurance company which passes stress tests; far more fun than frequent trips to A&E!

Simple solutions for your complex problems.

Benefit from quality software solutions to automate reinsurance processing. And unleash the benefits of implementing a trusted Reinsurance Software Solution. Explore TAI’s suite of services & solutions to improve the quality of your data, and the backbone of your business.

Andy Hazell

Written by Andy Hazell

Head of Strategy & Business Development - EMEA


Topics: Solvency 2, Big Data

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