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Kelly O'Neill
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Fund Managers Express Concern Over Solvency II Data and Reporting Requirements

More than one in three insurance professionals and fund managers (36 percent) believe asset management companies are unprepared for providing the level of detailed data their insurance clients will require under Solvency II, according to a State Street survey of 100 insurance executives and fund managers*. Included within this are eight percent who think they are “very unprepared.” 

The survey findings also reveal that even if fund managers could provide the level of data required, 41 believe they would struggle to do so in a timely fashion.

Fund managers also expressed concern that there is a potential for strategic positions being “leaked.”  Some 31 percent think that alternative fund managers will be “very reluctant” to share important and commercial data with insurers under Solvency II for this reason, and a further 56 percent think they will be “slightly reluctant”. Some 65 percent believe fund of funds could be adversely affected by Solvency II because many of their underlying managers could be reluctant to share proprietary data. 

Martha Whitman, head of insurance solutions for Europe, Middle East & Africa at State Street said, “When our clients think of Solvency II they focus on the issues facing insurers, but the challenges can be just as demanding for the fund managers who manage their investments. The level of reporting and transparency required is significant.  We have seen a growing number of fund managers, in addition to insurers, approach us to help address the administration burden.”

When looking at alternative asset classes, given the higher capital charge insurers will have to pay under Solvency II, 10 percent of insurance executives and fund managers surveyed believe insurers will dramatically reduce their exposure.  To help address some of the issues, 43 percent of those surveyed predict there will be an increase in insurers entering joint ventures to change their exposure to alternative strategies and lower their capital charges – replacing their fund structure with direct investments in the area of real estate for capital, for example.

Overall, 68 percent of insurance executive and fund managers surveyed believe that the pressure of Solvency II on insurers will lead to them placing a greater focus on investment strategies that provide more predictable and uncorrelated returns.  However, 14 percent are very concerned that insurers will have a reduced appetite for risk and this, coupled with a low inflation environment, will adversely affect the ability of insurers to meet their liabilities and commitments to clients.