Asset managers face challenge of Solvency II

ASSET managers face a culture shock following the implementation of the European Union’s Solvency II directive, according to research released yesterday by KPMG.

The heavily trailed reforms will require insurers to hold increased levels of capital by 2014, as well as implementing an improved level of financial disclosure.

But a report commissioned by the European Fund and Asset Management Association suggests that although insurers are well prepared, asset management firms need to work harder to meet the same standards.

“The report makes it clear that detailed data requirements call for a higher level of interaction between asset managers and their insurance clients than has traditionally been the case,” said KPMG’s Daniel Gorton.

“The absence of a common standard for data transmission between asset managers and insurers greatly increases the complexity of data governance, and the required changes to the asset managers’ model of data provision will require careful preparation.”

Identifying three key challenges, the report says asset managers will be required to supply insurers with detailed data reports on a monthly basis that meet strict requirements on accuracy.

Secondly, they will have to provide data for each asset on a security-by-security basis, a challenge given insurers’ tendency to hold diverse investment pools.

Finally, disclosure between asset managers will have to increase as insurers must be able to identify the ultimate asset behind every investment.

“The problem facing many businesses is that they often use a number of disparate IT systems to hold business-critical data across many different parts of the company, said Richard Sansome of IT firm Mastek.

“With about 19 months to go until the introduction of Solvency II, organisations need to have the resources in place to meet new guidelines around data management.”