Solvency II is Here For Insurance Companies – Are Pension Funds Next?

August 30, 2011

One of the consequences of the financial crisis has been the barrage of new legislation impacting financial firms in the UK and the European Union. One of the first pieces of legislation released is the Solvency II Directive 2009/138/EC impacting insurance companies, due to be finalised in October this year and implemented in 2012.

At the same time these regulations were being rolled out in the insurance industry, pension funds rebounded globally with asset levels rising back close to pre-crisis levels by the end of 2010, according to a recent Organisation for Economic Co-operation and Development (OECD) report (click here to see full report).  This rebound, however, is unlikely to save them from regulatory scrutiny.  In fact, in the same report the OECD is proposing that stricter regulations are required for the global pension industry.   In an interview on this issue, Lindsay Tomlinson, Chairman of the UK’s National Association of Pension Funds said, “It’s quite likely that EU regulators will look at Solvency II during their consultation and say it’s a reasonable model that could be applied to pension funds.” (read article here)

Exactly what the future holds for new rules in the pension industry is unclear at the moment, but conventional wisdom says it’s likely that it will involve elements of Solvency II.

Solvency II consists of three main pillars:

  • Pillar 1 – Quantitative rules such as capital requirements
  • Pillar 2 – Requirements for governance and risk measurement
  • Pillar 3 – Disclosure and transparency requirements

As the debate roars on about whether these regulations will help or hinder the pension industry, it is quite likely that Pillar 3 – disclosure and transparency requirements – is most directly applicable and most likely to be exported to pension funds.

To be able to meet these and future changes in regulatory reporting, organizations need to prepare themselves with flexible reporting tools.   Funds need tools that not only allow them to simply and efficiently create new bespoke reports, but also to alter and adapt reporting as the regulations evolve.

PORTIA’s enterprise-wide reporting solutions provide the flexibility to address ever-changing regulatory reporting requirements.  Our solutions are scalable enough to pull together data from a wide range of systems, allowing you to provide the transparency demanded from regulators.  With our industry leading solutions, organizations have the ability to report on any of their underlying investments in the format needed, without incurring the time delays and costs of outside consultants. 

Pension fund organizations may not be able to influence what the regulatory bodies decide, but they can be prepared for the decisions with a cost effective solution like PORTIA. 

What are your thoughts on how regulations will affect the pension industry?   Do you think it will go the way of Solvency II or some lesser version?

 – Markus Allard, PORTIA Regional Business Development Manager

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