Your operating landscape has changed significantly in the past years. Partly driven by a continuous low-yield environment, a tsunami of regulations and new accounting frameworks, but also by evolving client investment preferences (ESG), increased competition, the emergence of new technologies, and continued M&A activity. This environment has created a situation where the current operating model is often too complex, or even inefficient. Simply maintaining the status quo is no longer an option.
SimCorp is a trusted partner for insurance firms who want to transform their operating model and technology infrastructure. Whether you're a global firm operating across multiple regions and jurisdictions, or a regional specialist organization, our blend of software, services and expertise will empower you to tackle these five critical challenges.
THE FIVE MISSION-CRITICAL AREAS TO ADDRESS
A continued low-yield environment has put pressure on investment teams within insurance firms. Returns from traditional fixed-income investments are no longer matching the long-term obligations needed to safeguard the interests of your clients across life, annuities, and retirement planning business lines.
This has driven a move towards more diversification, both in terms of new asset classes like alternative investments, but also in terms of geographical allocation.
Furthermore the pressure on yields and solvency ratios has led to a shift away from guaranteed rate products towards unit-linked products.
These developments have brought several significant challenges. They have created more scrutiny on the cost of capital, the management of assets and liabilities and data quality. In turn, they have put pressure on the operating models, people, processes, and the technology which underpins business.
A tsunami of regulatory initiatives and new accounting frameworks has put pressure on insurance firms. In just the past seven years, we’ve seen the introduction of Solvency II, IFRS 9 and 17, EMIR, SFTR, the phasing out of LIBOR.
To address the regulatory challenges, insurance companies must be able to better control risk and capital requirements. Each new piece of legislation requires time, resources, significant cost and often spans numerous areas of your business, which all use their own technology, processes, and data sources. As a result, firms often take a piecemeal approach to solving the problem, instead of holistic, and then have to spend valuable time on reconciliations between different systems.
INABILITY TO SCALE FOR GROWTH
To lower the cost of doing business, insurance firms like yours are looking to scale efficiently and cost-effectively.
To access new markets and customer bases, achieve cost synergies, and gain specialist expertise not available in-house, many insurance firms are looking to expand. In the news recently, larger firms have looked towards M&A activity, including acquisitions or partnerships with alternative, private asset, or multi-asset boutiques to achieve this growth and scale.
These approaches create new challenges, including the costly and inefficient duplication of tasks. Different regions have their own distinct accounting frameworks, their own technology, teams and processes. Additionally, it can create complexities when pulling together a consolidated view of data, which is required in a fast-moving market to perform other requisite tasks.
If you’re on a growth journey, you’ll need to have a good view on how capital requirements will evolve and also the opportunities from investment forecasting functionalities, which only a single, integrated platform can deliver.
RISE OF DIGITIZATION
Insurers are now under pressure to deliver more transparent and real-time information to both clients and regulators. Digitization is a key component to deliver on these expectations.
To achieve this, the fundamental basics need to be addressed. Automating manual, repetitive tasks, standardizing investment processes, consolidating data sources, and removing legacy technologies are crucial steps to take.
As you shift into unit-linked funds you'll compete more with traditional asset managers – who are facing fee pressure and increased demands from clients. The ability to provide better client experiences through digital channels will be key in the battle to differentiate.
INCREASING DATA VOLUMES AND REPORTING DEMANDS
Mirroring the rest of the buy-side community, insurers are required to handle increasing volumes of data. Traditionally, this has been handled in spreadsheets and multiple disparate systems that do not allow information to flow easily across the whole organization.
Yet, data volumes will only increase. Market trends such as ESG, will require the integration of additional data sets in the investment and risk management process and create more challenges for the aggregation, analysis and reporting of data to clients, prospective clients and regulators.