Solvency II Under the Bonnet: Building the Risk IT Architecture that Serves Your Business Strategy

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7 July 2010



Solvency II is pressuring insurers to move away from ad hoc analytics towards industrialized risk management. In a recent Oliver Wyman survey, leading European insurers were asked to name “enablers” for meeting these demands and major obstacles to success. Most had the same answer to both questions: technology.

A gap has opened up at most insurers between the expectations for IT’s provision of risk-based measures into business as usual, and what is actually being delivered by their Solvency II programmes. In Solvency II Under the Bonnet: Building the Risk IT architecture that serves your business strategy, Oliver Wyman identifies the four most frequent challenges that underlie this risk-technology gap:

  • Neglecting risk requirements beyond the Risk & Actuarial function
  • Failing to deliver industrial-strength risk data
  • Failing to install extended IT processes and governance – professional, but flexible
  • Insufficiently preparing the IT infrastructure

For each of these four issues, Oliver Wyman draws from extensive experience with Risk IT in the context of Solvency II and Basel II to outline tried-and-tested solutions to close the gap between expectations and actual delivery of risk technology. Ironically, most risk technology gaps are actually driven by too much focus on risk technology, neglecting to address the nature of the required change: go beyond model-centric silos, embrace the uncertainty with an iterative program that can cope with a moving target, appreciate the brownfield nature of the change, and engage in the necessary cultural change.

"Many insurers focus their Solvency II programmes on an upgrade of risk modelling capabilities. This causes ‘model-centric silo thinking’ that neglects the overarching cultural change that Solvency II requires,” Dietmar KottMann, partner at Oliver Wyman and one of the authors of the report. “The resulting gap between expectations toward risk technology and the actual delivery is acutely endangering the success of several Solvency II projects – just as it caused some Basel II projects to run into serious trouble."

This report provides perspectives to examine common issues and proposes tried-and-tested approaches for dealing with them. It is also intended to be a guide for insurers and solution IT planners for Solvency II initiatives.

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Capital Markets, Life & Health Insurance, Property & Casualty Insurance, Wealth Management
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Insurance, >>Life/Annuities Insurance, >>Property / Casualty Insurance, Risk, >>Financial Services Risk
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