Added value for the entire company with Solvency II
Solvency II is a comprehensive set of stringent requirements for insurance companies relating to data quality, reporting and documentation. The same requirements apply to both large and small companies, and for smaller operators such as Eika, seeking support outside of the organisation was an obvious part of the process of meeting the requirements and making use of the opportunities.
The Eika Group has a risk organisation comprising five employees, who work together closely and exchange experience across the organisation. At the same time, we make use of our relationship with SAS Institute and the risk expertise of their consultants. When we chose SAS as our partner, it was crucial that the service involved more than just a technical solution.
”From a risk manager’s perspective, Solvency II primarily means focusing more on risk management,” explains Eika’s Hans Olav Høiby. Høiby was in charge of risk and project management for the insurance company’s Solvency II work, and views the regulations as both a demanding legal task and an opportunity for business development within the company. He has now taken up the positions of CFO and Deputy CEO.
”Focusing more on risk management also means the senior management are more aware of how data quality and analysis
can contribute to business benefits. The results of the work on risk give us a better basis and qualitative support for strategic decisions.”
Avoid pointless bureaucracy
”The aim of meeting the requirements of Solvency II is obviously to be compliant in time,” says Hans Olav, ”but it’s also important to ensure that bureaucracy doesn’t take over. While we are creating systems and procedures for fulfilling the regulations, it is important to Eika that Solvency II doesn’t merely generate additional costs as a result of the added administration.
”The rules are the same for all insurance companies, and as a relatively small organisation it’s crucial that we are also able to
develop better internal models as a result of Solvency II. So far, we have found that we can use expertise and insight from the project both for overall development of the company and at product development level in the individual departments.”
The importance of support from external competence
Eika has worked on adapting to the Solvency II regulations since 2008, and Høiby emphasises the value of having partners with experience of similar projects. ”So far, we have found that this is a demanding subject. There are lots of parallels with Basel II, but in most aspects Solvency II goes further and has stricter requirements. Formal competence in this area is sparse, and we needed to develop the necessary expertise within the company while the project was underway.
”The Eika Group has a risk organisation comprising five employees, who work together closely and exchange experience across the organisation. At the same time, we make use of our relationship with SAS Institute and the risk expertise of their consultants. When we chose SAS as our partner, it was crucial that the service involved more than just a technical solution. We find that SAS is very knowledgeable, and it is important for a small company like Eika that our partners have a comprehensive understanding of the challenges we have to deal with.”
A good result grows from the right starting point
The way a project is set up is generally crucial to the end result. For Eika, the Solvency II project began with a comprehensive GAP analysis. Hans Olav Høiby highlights this type of analysis as an absolute requirement for a good result.
”We used the GAP analysis both for our own learning and as a basis for choosing a supplier. It makes sense that operators offering advice on solutions for compliance with the Solvency II requirements will also have a sales agenda, but this makes it even more important to have a good basis for making the right choices independently. Obviously, we compared SAS Institute’s suggestions with our own GAP analysis, and discovered there was a high degree of correlation.”
In addition to being well prepared, Høiby emphasises the need for internal anchoring.
”In theory, acceptance and understanding at senior management level are prerequisites for success, but it’s not always that easy to implement them in practice. At Eika, we had the management’s full support and focus from the outset in terms of an understanding of the project, the needs arising from the regulations and, of course, the necessity of implementing the processes appropriately. Added value for the company as a whole was an overarching requirement, ensuring that we don’t build reports and procedures that can’t be used as planned.”
Asked what he would do if Eika had the chance to start over with their Solvency II project with the experience they have now gained, Høiby says he would take the same route again. ”We’re not there yet, but together with SAS Institute we’re well on the way to both completing the requisite tasks and exploiting the opportunities of Solvency II in the form of focusing on quality, analyses and good internal procedures.”
Solvency II regulations are comprehensive and places high demands on insurance companies relating to data quality, reporting and documentation.
Better use of the opportunities arising from Solvency II has given Eika a strengthened quality focus, good internal models and better basis for strategic decisions.