Solvency II, the clock is ticking – Timelines, Activity & Implementation

On the 2^nd October the European Commission published the 2^nd ‘Quick Fix’ directive, finally providing some clarity to insurers, asset managers and third party administrators (TPAs). The dates as many expected are 31^st January 2015 for transposition and 1^st January 2016 for implementation.

2013 has seen many put their programmes in a holding pattern or in some cases moving them to a business as usual phase, and most if not all have reduced spend on their programmes.

So what impact will this announcement have for each of the parties involved?

What has been evident in the market for the past few months is that whilst discussions on Omnibus II have been progressing, albeit with dates in a constant state of motion, insurers have been planning based on the assumption that the 2016 date was the most likely outcome. This may have been down to the looming parliamentary elections next May, and the realisation that if clarity on timelines was not in place, the risks of carrying Solvency II forward with a new team in place were too great. It may also have been down to the interim guidelines, which would require a large portion of the work to be completed anyway.

Noise from the insurer side was clearly showing that firms were planning dry-runs starting with some for year-end 2013, with the majority planning for the end of quarter two 2014. The impact this will have on the asset manager and the third party administration side will be significant.

Both of these parties have in 2013 by in large stalled their response to Solvency II. This is understandable, as justifying budget spend on solutions without knowing any concrete timeframes was all but impossible.

In people’s minds 2016 may seem somewhat a distance away, but when you look at the activity that will begin in 2014 firms will need to start planning now.

It seems some insurers will require data for the end of 2013, it looks as though asset managers and their TPAs will most likely be providing this through tactical solutions, as few will have strategic ones in place by then. This is not ideal, but understandable.

However, the vast majority of insurers have a Q2 – 2014 dry-run plan in place, and this is when tactical solutions will not suffice. If this is still the case at that point in time, insurers will find it very hard to manage the multitudes of differing deliveries from their asset managers.

Word on the street is that the Investment Management Associations (IMA) data model for the minimum requirements to service pillar I SCR calculations & pillar III reporting is now completed and due to be issued to the market soon.  Created by the third party administration working group within the IMA, the model is designed as a standard to aid in transfer of data between asset managers and their insurers. Much focus has gone into avoiding the transfer of licensable data within the model with a view to reducing the cost of servicing investors, which the industry will welcome.

I recommend that as an asset management firm, if you have not already done so, get your hand on a copy of the data model and look to implement it as soon as possible.  In many cases,  projects to do this may well take 6 months, and with June 2014 looking like a key date for your clients, time is running out.