Solvency II presents significant challenges, says Blackrock

Insurers face significant challenges in order to meet reporting requirements for Solvency II, according to a study carried out by Blackrock.

The study found that meeting Solvency II’s data reporting requirements is a major concern for insurers. Although 97 percent of survey respondents are confident in their own investment governance and risk management capabilities, over 90 percent are very or somewhat concerned about meeting the requirements for timeliness (95 percent) and completeness (94 percent) of data under Solvency II.

“Despite several deferrals of the implementation deadline, Solvency II has already proved a major catalyst for change with insurers spending considerable time and resource on preparing for its introduction,” says David Lomas, global head of BlackRock’s Financial Institutions Group.

“As they plan for this new regulation, insurers face a market environment of unprecedented challenges including – a continued sovereign debt crisis, frustratingly low yield from traditional fixed income, high-levels of equity market volatility, and anaemic economic growth. Against this backdrop, insurers need income to meet their liabilities and the research shows they may look to increase their allocation towards alternative asset classes such as hedge funds and private equity to achieve this.

“Additionally, there is a clear disconnect between insurers’ confidence in meeting the requirements of Solvency II and the understanding of the necessary time and resources needed to meet these challenges – specifically in relation to ‘look through’. Anxieties about data management must be tackled if insurers are to achieve the optimum investment strategy and asset allocations to deliver superior returns, and consequently they may need to revisit the amount of time and resource they invest in this area.”