Obtaining accurate look-through data on fund of funds investments is set to be the second great Solvency II hurdle facing insurers and asset managers, leading look-through data utility Silverfinch has argued in its 2015 review.
The report states that the advent of Solvency II means that asset managers are facing immediate and increasing pressure from insurers to help them meet the challenge of look-through data for fund of funds investments
A significant number of Europe’s 5,000 regulated insurance firms are yet to engage with fund managers on the collection of asset data, the review also notes.
Commenting on the performance of insurers, Silverfinch observed that many data models have been tested with out-of-date or incomplete information. A recent analysis of nine French insurers by accountants EY highlighted that pillar 3 data remains an area of concern with all of the firms rated poorly on data quality.
According to Silverfinch’s 2015 Update, the two key factors which aided insurers and asset managers in preparing for the regular delivery of detailed look-through data on insurers’ investments were the arrival in October of a stable version of the Pan-European Exchange Template (TPT) and the creation of a scalable legal and non-disclosure agreement by Silverfinch. The non-disclosure agreement is required to provide asset managers with the necessary legal comfort that their data is secure and treated as confidential.
John Dowdall, managing director of Silverfinch said:
“While the first half of 2015 was very much the realm of the early adopters, there was a very steep increase in adoption of Silverfinch by asset managers as the year progressed. 98% of top 50 global cross-border asset managers now have insurer clients on Silverfinch.
“Looking ahead, fund of funds has proved to be a particularly tricky issue for the market to address. The requirement to source look-through on multi-manager and fund of funds structures is clearly defined in the Solvency II regulation. This issue will be stage two of the Solvency II journey and we should expect it to come knocking on doors in the near future.
“In early 2016, we are seeing intense pressure to complete the collection of robust, granular and accurate look-through data. That pressure may not dispel as rapidly as the industry originally thought. There are still many snagging issues to manage.”
Silverfinch is a secure fund data utility that allows insurance companies to receive highly detailed so-called ‘look-through’ data on their investments placed with asset management firms. The data is required by insurers to assess the degree of risk to which their investments are exposed, a key requirement of Solvency II. Without this data, an insurance company is not compliant.