SAP BI and Solvency II

by Arwold Koelewijn on May 22, 2011

Insurance companies are facing a lot of changes in the coming years. Apart from topics as need for cost reduction, new products and new concepts, they also have to deal with the implementation of Solvency II.
A solid BI architecture, as SAP BI, can support these needs.

Solvency II is the updated set of regulatory requirements for insurance firms that operate in the European Union.
The Solvency II framework has three main areas (pillars):
Pillar 1 consists of the quantitative requirements (for example, the amount of capital an insurer should hold); Pillar 2 sets out requirements for the governance and risk management of insurers, as well as for the effective supervision of insurers; Pillar 3 focuses on disclosure and transparency requirements.

A BI architecture to support these requirements is not that different from a regular BI architecture when it comes to data warehousing and reporting.
The main difference can be found in the calculation of the capital requirements. Special dedicated actuarial modeling software (i.e. MoSeS, Prophet) is required to calculate these. The difficult part is how to embed these calculations into the BI framework.
One of the goals of Solvency II is to be able to reproduce data. In a regular BI dataflow, this is usually not an issue. In the first data layer, the data that is entered the datawarehouse is stored. Further enrichments in the datawarehouse of the data are done based on the data in this layer and can be reproduced as long as the data is in the first layer.
In this particular case, the data is exported to another software where based on a set of modeling settings, statistic simulations are run, and manual interpretation takes place. The result dataset, together with the modeling settings, is returned to the datawarehouse. Since part of this process concerns statistic simulations and interpretation, it is not guaranteed that the software with the same modeling setting and the same input data will generate the same results.
Another typical feature of a process like this are the manual corrections. The data provided by the sources can be incomplete and because of the timelines and the commercial consequences, it can be required to allow manual corrections in the datawarehouse. It is necessary that the allowed manual corrections are about adding entries that are traceable.

In order to maintain control of these typical features it is even more necessary to have a proper data management organization in place that focuses on:
• process quality (timelines, transparency, traceability, auditability);
• data quality (definitions, accuracy, completeness, appropriateness).

In conclusion: SAP BI is a BI framework that has all the tool necessary to support a Solvency II reporting process. Due to the typical features of this process, it is necessary to have a proper data management organization in place.

Previous post:

Next post: