Sai Perry, Head of Solutions, Europe & Asia, Clearwater Analytics
Over the past ten years, insurance professionals have invested in increasingly complex assets, such as private equity and mortgage derivatives, in their search for yield. Today, insurers invest in a variety of asset classes, in numerous different currencies, across multiple accounting regimes. This uniformly global complexity increases the challenges of managing risk, regulatory compliance, and performance. A lack of visibility over these investments only adds to the mounting pressures on investment teams. In fact, today they rely on a patchwork of inflexible, error-prone legacy systems and processes.
With these challenges in mind, let’s explore the three reasons why insurance businesses should be modernising their investment accounting and reporting, beginning with accurate and timely data.
- Trusted data is the cost of entry for yield
High-quality and clean data offers an opportunity for insurance investment professionals to ensure they reach their goals for yield while reducing risk and accelerating growth. Today, most organisations find they spend extraordinary amounts of time and effort on obtaining and cleaning the data provided to them from custodial banks and partners. This back-office work leaves little time for strategic thinking and proactive investment.
By embracing a managed solution that gathers and automates the aggregation of data from a variety of disparate sources into a single platform, insurers can focus their energy on taking action. Accurate data is needed daily, not weekly or monthly.
- Keep up with accounting standards and regulatory reporting
Further complicating and challenging investment teams is the constant rise in regulations. In 2008, there were about 10,000 regulatory alerts and now we see more than 60,000 per year. Consequently, there has been an exponential increase in the need for regulatory reporting and a growing demand for insight across a company’s entire investment portfolio. The variety and pace of regulatory change is daunting to even the most seasoned accounting professionals.
IFRS 17 and IFRS 9 are just two examples of the heightened standards which require extra data and tighter reporting timetables. The reality is, accounting departments are not getting any bigger, so how do you manage the strain?
Embracing modern solutions and true investment accounting “as-a-service” solutions that provide compliance reporting is one strategy. Solutions that provide IFRS compliance reports out-of-the-box forge a faster path to compliance. In addition, if accounting teams opt for a system that delivers a comprehensive, up-to-date set of investment disclosures, at the push of a button, they can be confident that their investment schedules always comply with all regulatory reporting requirements.
Insurers should also choose a software-as-a-service (SaaS) solution that’s single-instance, multi-tenant, and actively managed to always comply with the latest standards. With the implementation of smart SaaS solutions, insurers can significantly reduce the need for manual processes. This frees up teams to do more valuable strategic work so they can grow as well as handle larger portfolios and responsibilities – all without increasing headcount.
- Deliver investment analytics and compliance monitoring
In addition to supporting the regulatory requirements outlined above, a modern investment reporting and accounting system facilitates a variety of compliance reporting with one example being environmental, social and governance (ESG) compliance and reporting.
When financial professionals use investment accounting as-a-service solutions, they have the support of a full team that spends time monitoring how to drive compliance and manage risk. With data at their fingertips, insurers can react in real-time to exposure in their portfolio. It might be a financial market collapse like we experienced in 2008 or a single event that rocks one industry in one country like the more recent issues with Evergrande. By investing in this technology now, insurers can be confident that they can handle the challenges as and when they occur rather than scrambling to react.
With complexity rising it’s time to embrace new systems and processes
In summary, investment accounting and reporting isn’t simple. In fact, it’s getting more challenging on a daily basis. Insurers are being asked to do more complex things, with less time to do so. And they’re forced to do them with outdated systems that were never intended to handle the level of regulation in a very tight timeframe. Investment professionals within insurers need to adopt automated, data aggregation and reporting solutions for investment portfolio data to simplify and streamline this process so they can focus on driving value for their companies, customers, and their bottom lines.