Soulas: Today’s complex regulatory landscape in insurance

Today's regulatory landscape is complex – both technically and operationally. For insurers operating across multiple countries or territories, this poses an additional challenge as there are country-specific nuances that must be taken into account. Further, for a number of insurers (and multi-national ones in particular), there are multiple different regulations being implemented at the same time! 

Investing in solutions

It is for this reason that RNA Analytics has a comprehensive suite of solutions to cover specific regulations. In the past 24 months, we have made significant investments in our IFRS 17 and ICS reporting solutions. And our recently developed K-ICS and J-ICS packages were created by modifying our existing Solvency 2 Package – specifically for the Asian market. Our first release, K-ICS, created for the Korean market, will be followed by the J-ICS package for Japan. We are proud to be building a leading market position with these solutions, which provide customers with an end-to-end solution to the changes in the new solvency regulations being implemented in Korea this year and in Japan in 2025. 

The recent surge in regulatory change has presented insurers’ finance departments with a significant task when it comes to reporting. 

LDTI, for instance, demands a far greater integration of finance and actuarial teams’ processes and systems; and introduces additional complexity in reporting. Large volumes of actuarial data are required to establish the models for both LDTI and IFRS 17. They also have to be tested, periodically validated, and recalibrated at defined frequencies to maintain relevance in light of changes to business conditions and assumptions. 

Different challenges and different markets

The additional burden for some carriers of the Insurance Capital Standard is particularly challenging, with its goal of establishing a common methodology that produces comparable outcomes across jurisdictions. Insurers in EMEA have also had the upheaval of the capital requirements of Solvency II, and, similarly, an overhaul for income reporting of IFRS 17 and IFRS 9. 

A commonality in reporting approach – whether across a company’s infrastructure (business units/companies in a group) or across reporting frameworks can only be a positive for carriers, as its leads to synergies in model implementation, maintenance, and execution costs, and also offers a single-version-of-the-truth – giving customers extra confidence in the results. Actuaries are increasingly being called upon – and not just by insurers – for their insight into energy modelling, agricultural adaption, and scenario analysis. 

The risks of a disorderly climate transition are also being widely discussed. It is also in the climate change arena where the greatest regulatory pressures are being felt, and part of the widening remit of the actuary will be in supporting insurers with the necessary disclosures. Current actuarial methods will need to evolve to adapt to these new risk realities, as actuaries begin treating climate change as a primary risk, support firms in creating new products based on novel market needs, and curb underwriting risk. 

Climate change and sustainability represent material financial risks for financial institutions more widely that are advised by actuaries, who will need to follow an ever-expanding arena of changing risks and priorities. 

Accounting for ESG

Across ESG more broadly, insurers will need to allow for line-specific ESG factors on their liabilities and assets. For liabilities, they may need to tweak, amend – or even replace – parts of their modelling process to capture heightened natural catastrophe perils, for instance. Embedding an appropriate risk management approach is essential to maintaining financial stability, providing effective coverage, and meeting policyholder expectations in the event of large volumes of claims in a short timeframe. 

Whether implementing new regulations or developing and pricing new products, building accurate and realistic models quickly is a requirement for all insurers. 

To address this, there is an extensive library of standard code installed in our solutions. The standard code is primarily a collection of modules or building blocks. These can be fitted together according to the specific need or market to form assets, liabilities, products, and calculation routines. Our more recently introduced non-life standard code is a collection of loss reserving modules that combine powerful modelling and actuarial reserving methods with flexible mechanisms to structure, access and manage data sets, all within a governed framework. 

How RNA Analytics can help

We offer a consistent, modular, and flexible approach that enables users across multiple jurisdictions to report in a standardised and trustworthy manner. 

With so much change in such a short time, we know that some insurers have been overwhelmed by the tasks they have been facing. We have been providing a good deal of both consulting and technical support and advice on regulatory questions and requirements in recent years – and will continue to do so as further changes come in, and our clients need further assistance. With our tools being cloud-based, regular updates are of course issued to ensure compliance with new regulations, but some clients may opt for further consultative support – in particular smaller insurers or actuarial and accounting teams. 

Most recently, the team has been helping clients to prepare for IFRS 17 and Solvency II/ICS, and regularly talks to clients about the potential of new data science technologies, including big data, AI and future preparations for tackling such challenges as cyber risk and natural catastrophe. 

Attempting to implement today's complex reporting demands without a comprehensive technical solution would be extremely difficult, if not impossible for some insurers, with staff stretched to just run models and report numbers and little to no time for analysis and other value-add. 

We understand that a number of carriers discovered early on that their processes for determining the impact of the myriad of regulations, given the differences in reporting, were inefficient and ineffective, making the exercise not just about compliance, but also an opportunity to improve, and ultimately, to help insurers thrive in what, I think we can all agree, is a very uncertain time in the global economy.  

About the author

Matthieu Soulas, RNA Analytics’ EMEA Consulting Director is a Fellow of the French Institut des Actuaires and joined RNA Analytics in 2011 to take on the role of Actuarial Modelling consultant focusing primarily on Client consulting projects, such as Solvency II and IFRS 17,but also supporting Sales and Client relationships. Now in his role as EMEA Consulting Director, Matt continues to work as part of the global consulting team, leading the delivery department and managing EMEA consulting projects. With over 15 years’ experience, Matt has used his expertise to develop the SII code library for standard formula (Helper Tabs modules, input template) and regulatory reporting templates (QRT, IFRS 17 Disclosure and subledger).