Product Brief

OverviewInsurance companies conducting business in the EU must comply with Solvency II regu-lations. Compliance has presented insurers with a number of challenges, ranging from specific requirements regarding data quality to delivering more than 500 standard reports in both Excel and an XBRL format within weeks after the insurer’s financial reporting period ends.

If your insurance company can’t aggregate multiple risks at a firmwide level, how good is the risk decision making? Without approved internal models, the standard model approach can result in higher economic capital require-ments; this leads to a lower rate of return on equity and other investments and rating agencies downgrades. Not being aware of your detailed risk exposure might also lead to capital add-ons applied by the regula-tory authorities. The consequences of not aligning risk and capital requirements or noncompliance with Solvency II regulations can be severe, including a lower financial rating or inability to conduct business in Europe.

SAS® Firmwide Risk for Solvency IIKnow your risk and capital requirements and streamline Solvency II compliance

The SolutionSAS Firmwide Risk for Solvency II performs risk analysis and risk-based capital calcula-tions for insurers. With a data management and reporting platform that includes an insur-ance-specific data model, you can implement the Solvency II standard model approach for calculating risk-based capital.

The solution has as its foundation an extendible risk analytics framework to support other regulatory regimes. It also supports an internal model approach for risk analysis, providing insurance companies with additional business benefit. Designed to perform risk analysis and risk-based capital calculations for all insurance companies, our software supports the standard model approach for Solvency II compliance at solo entity and insurance group levels. It also performs:

• Stress testing and scenario analysis.

• Calculation of risk margins.

• Aggregation of risk capital charges.

• Calculation of solvency capital requirements (SCR) and minimum capital requirements (MCR).

• Regulatory and internal risk reporting.

ChallengesCompliance with Solvency II requirements• Insurers are struggling with new solvency models, data management processes and

complex reporting requirements to evaluate their risk exposure. Excel and other tools don’t have the governance and auditability to support Solvency II requirements.

Faster internal and regulatory reporting • Legacy reporting systems, often based in Microsoft Excel, aren’t sophisticated enough

to respond to compliance and internal reporting demands.

Better risk decision making• Siloed systems and business units prevent the data aggregation needed for reliable,

fact-based decisions. Inadequate software capabilities make it impossible to accurately value assets and liabilities.

Ineffective data management on inconsistent and inaccurate data • Multiple legacy systems and disparate solutions can’t connect data sources to create a cohesive risk management data warehouse.

Integrating with insurance systems like assets and liabilities is burdensome, but required for true risk analysis.

Delayed implementation times and rising expenses• Regulatory requirements (i.e., reporting details) can have prolonged development cycles, and combining data from separate

systems and business units can lead to higher support and compliance costs. Spreadsheets and unsophisticated modeling are slow and unscalable. Accountability is difficult to track, leading to poor transparency and auditability.

CapabilitiesOur solution is designed for compli-ance managers, actuaries, risk analysts, IT managers and senior executives. For example, risk analysts can analyze all material risk and provide senior executives with a greater understanding of company risk and financial conditions.

SAS Firmwide Risk for Solvency II can meet the risk needs of insurers in three critical areas:

Risk data managementData integration typically accounts for up to 70 percent of a risk management project’s costs. SAS provides an integrated risk data warehouse that delivers consistent, accurate data that is fundamental to a successful risk solution implementation.

Insurers can acquire and consolidate historical data from internal and external sources for risk analysis and reporting. The data warehouse contains data related to asset/liability exposures, claims, reinsurance arrangements, economic/actuarial risk factor assumptions and product configuration.

• Data quality tools provide the ability to eliminate or reduce data inconsistencies.

• Data management supports integration with third-party risk applications.

• User security provides the ability to create and amend user security for access, authentication and authorization.

• An audit feature delivers a full audit trail of all changes to data and risk models.

Risk analysis and aggregationInsurers are required to perform complex calculations to anticipate risks and initiate control measures to maintain solvency ratios that meet with regulatory specifications. Financial and insurance firms have relied on SAS, the leader of advanced analytics, as their standard of risk model quality for decades.

Relying on fully traceable processes, SAS aggregates risk across the insurance enterprise and calculates the quantitative measures required for Solvency II. Our solution includes:

• Calculation of the SCR and MCR for solo entities and insurance groups.

• Calculation and aggregation of risk capital across all risk types (market, life, P&C, health, operational and credit risks).

• Calculation of risk margins for non-hedgeable liabilities.

• Modeling of assets and liabilities on a market-consistent basis.

SAS provides QRT regulatory reporting in both Excel and XBRL format.

• Calculation of reinsurance receivables.

• Calculation of available capital and solvency ratio.

Risk ReportingSAS delivers predefined templates and ad hoc reporting for users at any level to disseminate risk information to regula-tors for Solvency II compliance and to senior management to improve risk decision making. Using the solution’s data point model, insurers can streamline and automate Solvency II reporting require-ments with:

• Web reporting tools for customized dashboards and ad hoc reports.

• Prebuilt risk reporting that includes standard reports (QRT) both in Excel and XBRL formats, as per the prepara-tory phase requirements and the EIOPA-BoS-15-115 requirements.

• An extensible validation rule engine that includes more than 600 predefined intra-report and inter-report validation checks according to the latest EIOPA specifications.

• The ability to manage ongoing regu-latory update and local supervisor preferred language.

The SAS® Difference

• Risk analysis framework. SAS Firmwide Risk for Solvency II offers a flexible and extendible software framework that meets the evolving risk analysis needs of insurance companies.

• Market-leading reporting platform. Access to predefined Solvency II regulatory reports and an extendible data infrastructure support ad hoc and nonregulatory reporting requirements.

• Integrated data management platform. Improve data quality and meet Solvency II guidelines by eliminating or reducing data inconsistencies. Implement faster and reduce effort with prebuilt data management capabilities for loading data from the data model to the risk software.

• Insurance-specific data model. The solution serves as a single source of information that addresses Solvency II data requirements and accelerates Solvency II compliance.

• End-to-end functionality. SAS delivers an integrated insurance data model, data management capabilities, advanced analytics and reporting technologies for a comprehensive approach to a risk culture.

Benefits• Ensure Solvency II compliance. Our risk

management framework calculates the standard model MCR and SCR require-ments for all insurance companies.

• Easily meet Solvency II reporting requirements. Flexible reporting capa-bilities allow you to create regulatory and management reports required for Solvency II.

• Perform more accurate risk analysis. Improve risk decision strategies by better understanding how economic factors have an impact on your compa-ny’s balance sheet. Ensure solvency by stress testing your assets and liabilities for sudden and dramatic changes in market conditions.

• Fully support Solvency II data quality requirements. Comprehensive data governance capabilities, including an insurance-specific data model, help you to improve data quality by eliminating or reducing data inconsistencies.

• Extract, integrate and validate risk data from almost any source. With prebuilt data routines and validation rules based on latest EIOPA specifications, you can consolidate and store all Solvency II

required data (e.g., assets, liabilities, policy, claims, reinsurance) in one central data warehouse. Flexible inte-gration with third-party risk and actuarial applications is also available.

• Ensure transparency and trace-ability across the entire process. Self-documenting changes to data and risk models make auditability more efficient.

• Gain a greater competitive advantage. Better allocation of risk-based capital charges enables you to provide more competitive premium rates.

• Safeguard against future regulatory changes. SAS provides a flexible and extendible software application that meets the evolving risk analysis needs of European insurance companies and supports other insurance regulatory regimes in addition to Solvency II.

• Lower total cost of ownership. Our single solution provides a comprehen-sive set of features from data integration to risk analysis to reporting – all in one risk management framework.

Risk analysts can perform what-if scenario analysis with an easy-to-use web-based tool.

SAS and all other SAS Institute Inc. product or service names are registered trademarks or trademarks of SAS Institute Inc. in the USA and other countries. ® indicates USA registration. Other brand and product names are trademarks of their respective companies. Copyright © 2015, SAS Institute Inc. All rights reserved. 107885_S141916.0915

An intuitive interface lets users easily configure job-flow with drill-down capabilities.