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"...creating and sharing a blueprint or a target operating model makes it easier to create meaningful overviews and summaries of the Solvency II deliverables..."

 

 

 

Scott Paton, pa Insurance expert

 

 
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Solvency II: many builders, not enough architects?

The complexity of Solvency II requirements for insurers can lead to a focus on the detail with little long term view.  Establishing a shared vision of the solution, and how the components will interact and develop over time will pay dividends over the coming months and ensure the changes stick.

Although debates continue over the rigour with which regulators will apply the requirements of Solvency II, it is clear that compliance will mean comprehensive change for most large insurers.

However, the combination of the complexity of the guidance issued so far, and the wide-reaching nature of the resulting changes, can leave SII change teams with no clear view of the overall vision of the programme, the ambition and scale of the solution, or how the areas they are changing will need to interact in future.

So, how can insurers deliver a co-ordinated Solvency II programme in the face of so much detail, scale and complexity? 

We have found that the chances of success can be improved by establishing a shared vision of the solution, then describing the way that components will interact and develop over time, and turning this into a shared understanding of how life will change across the business.

Establish the shared vision for the Solvency II response

A Solvency II programme needs a shared vision of what is being created - a blueprint - at its heart.  This needs to set out:

  • The scale and ambition of the programme: are we aiming to be compliant and no more, or to deliver maximum business benefit at minimum cost, or to deliver a class-leading risk and capital management organisation?

  • The elements of the solution: what are the key changes to be made in each part of the business?  How do processes, systems, people, governance, and corporate structures need to change?

  • How life will be different: what changes will the business see once the solution is delivered?

Describe the way the components will interact and develop

Once the blueprint is clear, the next stage is to add a dynamic component; in other words, the interactions between the various solution elements and the rest of the business.  It should aim to address:

  • The overall map of Solvency II-related processes: how do the solution components interact, and how do these interactions change over time?  Who owns each component?  Are the interim states actually workable?

  • The capability model: as elements of the solution are delivered, what can the business actually do as a result?  How does the ability to comply with Solvency II evolve? 

  • Organisational impacts: how will resourcing and knowledge levels need to change over time?

Focus on shared understanding

PA has found that creating and sharing a blueprint or a target operating model makes it easier to create meaningful overviews and summaries of the Solvency II deliverables, and to evidence compliance with the ‘Use Test’ elements of the Directive over the medium term. 

PA is working with many leading insurers to ensure the vision at the heart of their Solvency II programme is clear.  To talk to us about your Solvency II programme contact us now.

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David Troman
Financial Services
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Financial Services
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