Article 132 of the directive requires companies to invest only in assets and instruments that can be properly identified, measured, monitored, managed, controlled and reported.
In terms of reporting, the insurance industry will report mainly via Quantitative Reporting Templates (QRTs’) and these require much more granular data and further look through – I.e the ability to determine the underlying asset actually invested in, regardless of whether the insurance company outsources or manages fund administration internally. Outsourcing of asset management also has license implications since the asset administration function will require the insurance company itself to pay for these. e.g. Data From Bloomberg, Reuters.
There are several Solvency II Reporting packages available e.g. from the likes of Moody’s Analytics and Tagetik. In my opinion, and from the trenches so to speak, the reporting package is just one small part of the effort required to help put the organisation into a Solvency II compliant state on January 2016. There are many challenges to overcome not least of which is the fact that the regulations are still evolving – and will thus impact any solution that is currently in the throws of being system tested.
In addition the responsibility for getting data to the QRT reporting package at the right level of granularity rests with the client – as would be expected. This means ensuring that the data integration platform is robust enough to pull through data that is granular enough from multiple data sources (often legacy) into a centralised staging area prior to transformation, as well as application of data quality rules and so on prior to loading into the reporting tool. This is no easy task. Reporting tools are at an early stage in my opinion and bugs will exist within them. There is therefore the real possibility that a client has to test its own software build from source through to target, and also has to contend with potential bugs in the target reporting package especially where calculations are involved – e.g. SCR or MCR.
A new reporting tool is not a silver bullet. Prepare to up the pace and resource required to get over the line for January 2016.