EFAMA KPMG Solvency II Report

4.2.5 Data Quality
4 WORKING GROUP FINDINGS | 37
Requirements
The Solvency II Directive requires insurers to provide accurate, complete and
appropriate data to the regulator, regardless of whether the source of the data is
internal or external to the insurer. Insurers will expect asset managers to provide
them with data that complies with these requirements, together with some form of
assurance over the quality of the data.
Challenges and Impacts
The requirements pose several challenges for asset managers:
• Materiality: Insurers need only to provide to the regulator data which are material
to their business, and only material data needs to be quality assured. The principle
of materiality must be applied to determine the criticality and risk that a certain set
of data presents to an insurer in order to define the quality
standards to be applied.
However, the asset managers cannot know which data are material for which insurer,
and therefore must be ready to quality assure all of the data it provides to insurers.
• Data quality scope: Asset managers and TPAs already perform a number of quality
controls and checks on the data that are currently provided to insurers. Solvency II
implies a large increase in data that the insurer needs to report to the regulator and,
consequently, a large increase in the data that asset manager will have to deliver to
the insurer. A gap analysis and subsequent process review should be performed to
assess the impact that this will have on current data management activity.
The gap analysis needs to consider the changing nature of some key data sets
that the asset manager currently supplies. For example, where an asset manager
currently provides an insurer with a single credit rating (e.g. a Standard & Poors
rating) and the direct legal issuer of a certain instrument, the insurer may now require
multiple credit ratings and ultimate parent information for Solvency II reporting.
•Timing conflicts: Insurers need to process large volumes
of data from different
internal and external providers within very short deadlines to report to the regulator.
This will increase the pressure on the asset manager to deliver holdings data and
enriched data to the insurer very early after the quarter end (for regulatory reporting)
or even after the month end (for monitoring purposes). This is generally expected to
be by business day three after every month or quarter end.
T here is an obvious conflict between
being required to provide data sooner in the
monthly cycle but at the same time needing more time to check that the data has
suffi cient quality for Solvency II purposes.
Further regulatory conflict may
also arise from the fact that insurers will now demand
information earlier than other types of institutional or private investors.
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