Every January I set out with a few aims and objectives for the year ahead. These are generally themed around aiming to get fitter, trying to lose weight and saying that I will run a marathon. I prefer calling them objectives instead of New Year’s Resolutions (NYRs). This is because my New Year’s celebrations have ended by 2 January and in a similar vein my pursuit of my NYRs also ends on 2 January!
Insurance companies tend not to have objectives like you or I – they can’t get fitter, they can’t lose weight and they can’t run marathons. They still will have objectives, and top of their list in the New Year will likely be the implementation of Solvency II.
In December the Prudential Regulatory Authority (PRA) published supervisory statement SS4/13 titled ‘Solvency II: applying EIOPA’s preparatory guidelines’. Similar to how a Weight Watchers™ plan sets out a diet to meet your objective of losing weight, the supervisory statement sets out a plan to meet the objective implementing Solvency II. The guidelines involve work in the following four areas:
- Systems of governance;
- Forward looking assessment of undertakings own risks i.e. the ORSA;
- Submission of information; and
- Pre-application of internal models.
The PRA statement goes into what their expectations are, how they will approach it and their interpretation of EIOPA’s guidelines.
Over the next month one of our objectives is to publish a series of blogs on these areas. Our aim is not just to regurgitate the guidelines but to set out:
- What the guidelines are and what the PRA expectations will be for UK firms;
- What firms should be doing; and
- How Barnett Waddingham can help you with implementation.
Many firms will have done a lot of work in these areas over the last couple of years but will need to look at these and demonstrate how they are meeting the requirements to the PRA. This will involve:
- Showing that you understand what the requirements are;
- Conducting a gap analysis to identify which areas still require work;
- Preparing a project plan to ensure that all outstanding items get done and ticked off; and
- Copious volumes of documentation.
Insurers’ aim of implementing Solvency II has many similarities to my NYRs but, unlike me, insurers cannot decide to abandon their aim on day 3. You will need to have a clear plan, realistic deadlines and milestones and make sure it adds value to your organisation.
Like a marathon, Solvency II is a long slog, but the end is now in sight. Those that have put Solvency II on the backburner for the last year now need to pull up their business socks, put on their corporate trainers, and get running!