It's Time for Asset Managers to Run with the Pack

Written by Brian Clarke on

With Solvency II reporting deadlines looming, we take a look at some of the challenges for asset managers in meeting the requirements from their insurance clients. In particular we consider what asset managers should do if they haven't already put a plan in place. One thing asset managers certainly should not do is ignore Solvency II and hope the problem goes away.

When it comes to Solvency II, the least you can say is that it has been taxing the minds of increasing numbers of people working in the financial industry. On the surface, Solvency II regulation appeared to affect (re)insurance companies, but it soon became clear that other parts of the industry would be embroiled. These include asset managers, fund administrators, custodians and TPAs. This highlights the inter-dependency that exists throughout the financial services industry.

The authorities in France carried out a 'dry run' last year and prior estimates were that 80% of insurers were ready for Solvency II. After the dry run had taken place, it was revealed that this proportion was more likely to be 20%. This is quite a surprising statistic as the general UK industry opinion was that the French insurers and asset managers were more advanced than those elsewhere, including the UK. What has happened?

Out of the seminars, conferences, roundtables and meetings that my colleagues and I have attended, some recurrent themes are emerging. The two most prominent themes are: i) a lack of clarity from the regulators ii) a lack of communication between insurers and asset managers.

Maybe there is clarity, but it's wrapped up in regulation-speak. Maybe there is communication, but it needs to increase in order for asset managers to avoid being caught out by client requests arriving at short notice.

Despite these obstacles, here are eight practical steps that asset managers can undertake now:

  1. Review any standards that are emerging – it might be time to 'run with the pack' and centre your service around the tri-partite template for Solvency II.
  2. Build an operating model – this should be based on the above standards.
  3. Review available tools / services where appropriate – these should help in the delivery, accuracy and timeliness of data to your client.
  4. Engage with your clients – put the standard template in front of them.
  5. Have a meaningful dialogue with your clients – use the standard template as a starting point. This may include issues around cost.
  6. Seek commitment – it is in the interests of the asset manager to gain commitment from all parties regarding the agreed deliverables.
  7. Aim for commonality – try to leverage work done with clients when agreeing a solution for other clients.
  8. Review licensing agreements – this is necessary to avoid any issues with data vendors or other parties.

There are numerous reasons to procrastinate, but Solvency II is now moving towards the execution phase and whilst there has been a hiatus of late, it is now necessary for asset managers to embrace the fact that they will soon be asked to provide fund information to their (re)insurance clients. As the deadline for submission approaches, these requests may come thick and fast.

Given the current understanding among asset managers as to the requirements, it is now time to be proactive. These eight practical steps will help asset managers prepare for the deadline of 1st January 2016.

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