11 July 2012

Risk.net: Standard Solvency II asset data framework 'at least 12 months' away

Asset managers seek to standardise Solvency II asset data provision, but an industry-wide solution presents challenges. A standard framework for delivering Solvency II asset data from investment firms to insurers is at least a year away, asset managers predict.

The investment management industry is keen to develop an industry-wide standard approach to the management and provision of asset data to meet the tough new Solvency II requirements.

But the lack of a central body to develop the standards and potential commercial conflicts of interest mean a market-wide standard will be challenging to develop. Many expect that an industry-wide standard in areas such as asset classification and data provision will gradually evolve as the major asset management firms and asset service providers develop their own sets of ‘best practice’ standards that are adopted more widely.

Dirk Popielas, Frankfurt-based head of European insurance solutions at JP Morgan Asset Management, says it will take at least 12 months for a set of best practices to emerge. “It takes industry work in all countries and teamwork with regulators, auditors and central banks to figure out what best practice could be. [The industry] might have reached an agreement by the middle of 2013. We have a view of what best practice could be in a year’s time, but it could change.”

Last month the European Fund and Asset Management Association (EFAMA) published a report in which it argued that greater standardisation would help to address some of the asset data challenges presented by Solvency II. The report proposed that the insurance industry, in collaboration with investment managers, should define a core set of data standards to meet the Solvency II requirements. It said there should be consensus on the asset data that needed to be provided by asset managers and third-party administrators (TPAs), which would cover the timing, scope and structure of the data to be exchanged, in addition to the file protocols to be used that would ensure standardisation. At the same time, clearer guidance was needed for insurers and asset managers on the use of carrier identification codes for classifying asset data, the report says.

Asset managers argue a standardised approach would improve efficiency and enable insurers to focus on the central risk management elements of Solvency II. “There is opportunity for greater efficiency through cooperation and the provision of central services”, says [Aviva's London-based chief risk office Richard] Field. “But there are competitive issues with that and it is not clear at this stage where that balance will emerge.”

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