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Solvency II pushes insurers to upgrade IT, risk management tools

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Solvency II pushes insurers to upgrade IT, risk management tools

The Solvency II framework pending in the European Union is providing impetus for insurers to invest in upgrades for their technology infrastructure and risk management tools.

Intended to reconcile and improve the various regulations applied to insurance companies operating in the 27 member states of the E.U., Solvency II employs a principles-based approach to regulations. But it touches on many internal functions of insurance operations as well.

Pillar 1 of the framework mandates capital requirements and prescribes how they are to be calculated. Pillar 2 concerns corporate governance requirements and mandates that an insurer operating within the E.U. demonstrate an effective risk management system. Pillar 3 concerns transparency and details the data reporting requirements insurers must follow.

Given the technology-intensive nature of many of these functions, insurance technology providers are now bringing products designed to help companies cope with Solvency II to market.

In July, Redwood Shores, Calif.-based Oracle Corp. unveiled a software platform intended to help insurers comply with Solvency II. The application, Oracle Insurance Solvency II Analytics, provides prefabricated reports and dashboards designed to help insurers meet Solvency II Pillar 2 and 3 requirements.

S. Ramakrishnan, group vp and general manager for Oracle Financial Services Analytical Applications, said the company designed the models to give users a consistent and multidimensional view of various risk and performance measures. “Solvency II is putting pressure on European insurers to add a new level of rigor to their finance and risk processes,” Mr. Ramakrishnan said in a statement.

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In a similar vein, data warehousing company Teradata Corp. unveiled an integrated hardware, software and services suite aimed for insurers planning for Solvency II. Dayton, Ohio-based Teradata argues that insurers should view the regulations as a chance to improve risk management, governance, data quality and analytic functions.

“Unfortunately, many companies are looking at Solvency II solely as a compliance issue,” said Teradata Vp John Burke in a statement. “The market leaders have a vision that the deployment of new business processes and technology to reach compliance with the Solvency II regulations will also drive a new generation of business intelligence capability that will be a competitive game-changer.”