Learning your lesson
Assurance work has highlighted some areas where insurers need to improve their Solvency II documentation and processes, say Martin Watson and Alex Arterton.
The first round of Solvency II assurance work has been a valuable exercise, highlighting areas where the quality of reporting by insurers may not stand up to external scrutiny. For the largest firms, this process was mandated in October 2014 by the Prudential Regulatory Authority (PRA). It required these firms to commission a two-step independent review of their Solvency II balance sheets to ensure they were on track for the go-live date of 1 January 2016. However, many smaller firms have voluntarily carried out similar reviews to highlight issues early and ensure they were happy with their opening positions.
These assurance engagements were a learning experience for preparers and auditors. Firms’ interpretations of the legislation and regulatory rules were externally challenged for the first time and new systems and processes were tested. Four key areas of findings are highlighted below.