Tag Archives: John McKenzie

IMAP firms confronted with data challenges

This InsuranceERM article (subscription required) cites Milliman’s William Coatesworth and John McKenzie’s publication summarizing a Financial Services Authority (FSA) report. The FSA report states that although most European firms are doing well meeting internal model data process (IMAP) requirements, others are struggling with basic governance issues.

Here is an excerpt from Milliman’s review:

Three challenges were identified in relation to the implementation of the data policy:

I. Most firms underestimated the time required to embed the data governance framework into business as usual (BAU)

This resulted in many firms having to recruit additional resources to manage BAU data governance activities. In many cases, internal data quality reporting remained under the responsibility of the project workstream with considerable inconsistencies in the metrics reported on, and how they were used on BAU.

Specifically, the report notes that firms were not always able to articulate what the terms “accurate”, “complete” or “appropriate? Meant in practice and hence were unable to assess data quality effectively – by the way of an example, the FSA highlighted the ability of underwriting teams to assess the materiality of data errors in catastrophe exposure data as an issue.

The FSA has commented that it expects firms to have a consistent process to measure, analyse and monitor data quality in BAU. Where firms are replying on on-going, and often complex, IT implementations to support data governance, they should either provide assurance that the existing system of data governance is adequate or provide details of the materiality of any gaps and when these will be addressed.

II. Most firms found it difficult to assign data ownership as part of their governance model

The FSA notes that while ownership of, and accountability for, the data is not specifically covered in the Solvency II Directive, the assignment of ownership of individual data items between producer and consumer roles, as seen in many firms, can help ensure the various stakeholders are aware of their responsibilities for maintaining data quality.

III. Many firms struggled with ensuring a consistent interpretation and application of group-wide policy and standards

This is an area where the FSA has commented it will look to ensure consistency, both in the adoption of standards, and in the metrics used for monitoring and escalation – although it notes the processes at solo level may be different. Where a self-certification based governance mechanism is used, firms should ensure there is a strong process for challenging and auditing these self-assessments.

Read Coatesworth and McKenzie’s entire article here.

Should firms get on with their ORSA development?

The European Insurance and Occupational Pensions Authority (EIOPA) published its final report on draft guidelines for Own Risk and Solvency Assessment (ORSA), which “underlines the purposes of the ORSA,” and provides “additional details on how the guidelines are to be interpreted.”

This article by the InsuranceERM (subscription) cites Milliman’s recent Solvency II paper authored by William Coatesworth, John McKenzie, and Neil Cantle where they provide a brief analysis of what the EIOPA’s proposals may mean for companies and Solvency II in general.

Here is an excerpt from their paper:

EIOPA’s final report on the ORSA guidelines sets out the responses and comments raised during the public consultation of the proposed Level 3 ORSA text initiated in November 2011 together with EIOPA’s review and resulting changes to the ORSA requirements.

Consistent with the guidelines set out in the original consultation paper, EIOPA’s report focuses on what the ORSA should achieve rather than how it is to be performed.

While a number of the changes are aimed at providing more clarity around the guidelines, the report does contain several changes that may prove significant to companies. This includes ORSA to be based on a multi-year time horizon rather than a series of one-year horizons.

While these guidelines are still in draft form, and may be subject to further changes in order to reflect future development in the Solvency II Directive as a result of Omnibus II, EIOPA has stress that companies should use these guidelines as the basis for their implementation of the ORSA.

The key message from some national regulators is that firms should now “get on with it” as it is a central part of the new regulation and there will be no more guidance.

Download and read the entire paper here.