GRC Challenges

Solvency II

Companywide risk management and satisfactory funding

As insurers and reinsurers doing business in Europe react to renewed opportunities, they also face the complex challenge to implement Solvency II. Solvency II, like Basel, is based on a three Pillar concept. The directive requires:

  • Governance and companywide risk management being embedded throughout the organization to manage all material risks (Pillar 2)
  • Capitalization standards for risks (Pillar 1), which are enforced to secure sufficient funding
  • Transparent disclosures and reporting to the supervisor and the public (Pillar 3)

The Quantitative Reporting Templates (QRT) starts in January 2013, the qualitative reporting is set to begin in 2015. Solvency II ultimately relates to governance, risk management and capital management. Pillar 2, including the Own Risk and Solvency Assessment (ORSA), has an impact on organizations. Insurers must demonstrate to supervisors how they have implemented risk management, including the related governance to identify, assess, monitor and manage their companywide material risks on a daily basis.

Quantitative and Qualitative Risk Management

Taking a process-based approach to risk is the easiest way to be Solvency II compliant for managing market, credit, liquidity, insurance and operational risks. This is especially important in multisite insurance companies where implementing such a Solvency program is extensive and complex. To be prepared, it is imperative that insurers develop their qualitative and quantitative process-based risk management approach and integrate this with their quantitative modeling systems.

Best practice for Solvency II compliance

BWise delivers enterprise Governance, Risk Management and Compliance (GRC) solutions for insurance firms. Based on a Solvency II methodology, BWise has collaborated with insurers and reinsurers to implement risk-based solutions for Solvency II. Based on requirements, BWise provides templates for risk frameworks as a starting point to embed companywide risk management for Pillar 2. This also includes managerial control and monitoring of the ORSA processes. Solvency II requires functionalities such as alerting, issue monitoring, governance embedding, documenting and reporting; all standard capabilities within the BWise solution. The BWise software solution also enhances efficiency and effectiveness for an organization, resulting in cost savings.