Silverfinch on 2016/17
December 12, 2016

Silverfinch, a look-through and data distribution hub for client regulatory reporting, has issued its 2016/17 review and outlook.

What happened in 2016…

The whimper: after years of planning, and a process riddled with delays, Solvency II is up and running, but instead of a full-on implementation, what we have got is a piecemeal introduction, with many smaller insurers given a pass on submitting key data during the first year. Will future implementations of regulations be the same? Only time will tell.

The achievements: that is not to say that the industry has not achieved a significant amount during the year. Both investors and asset managers are taking a more strategic approach to regulation, realizing that applying the rules is a cost of doing business that can be managed and turned to their advantage. There's hearsay evidence that some companies are reporting increased business due to being able to fulfil the regulatory requirements of their partners.

The look-through failure: insurance firms have focused on the Solvency Capital Requirement (SCR) element of Solvency II, while data reporting has taken a back seat. There is little progress on achieving look-through, an issue that will have to be tackled sooner or later.

The contribution from asset managers: the asset management industry and associated trade groups have stepped up to the mark when it comes to regulatory reporting. The Tripartite Data Model (TPT) provides a sound basis for developing Solvency II data reports and has been accepted widely across the industry. Likewise, the achievement of the European Working Group (EWG) in delivering the European PRIIPs Template (EPT) shows what can be done when the industry works together to achieve an outcome.

The delay: however the year ended on an uncertain note when the European Parliament rejected the initial level II Regulatory Technical Standards (RTS) for PRIIPs (packaged retail and insurance- based investment products). The European Commission eventually realized the game was up for a January 2017 launch and delayed the introduction by a year.

…and what awaits us in 2017

The pressure: this is the year that Solvency II really beds down, and no one expects the same kid gloves approach for companies over the coming 12 months. Some regulators (such as the Irish for example) are already insisting on full compliance for look-through. Pan-industry end-of-year reporting for 2016 means that we will have a clear idea of the failures and successes of Solvency II in coming months.

The tsunami: while companies will be focused on getting Solvency II right, at the same time they will have to prepare for PRIIPs and MiFID II. Will they have the resources to tackle all at the same time?

The unified strategic approach: it will become evident that regulation is not a series of individual events but is instead an ongoing programme that requires management at the highest level. More companies will adopt strategic regulatory programmes and bring in help from outside data management contractors. Both asset managers and insurers will revisit tactical implementation to automate processes and build scalability and client regulatory reporting.

The sales imperative: banks, insurers and fund managers will see more clearly how their sales are determined by their response to regulation. With Solvency II there was an implied restriction on selling funds should asset managers not be able to provide the data needed for insurance clients. With PRIIPs that imperative is made explicit – without the right information in place you will not be able to sell your financial products.

The lesson learned?: with MiFID II and PRIIPs on the horizon in 12 months both industry participants and regulators will be acutely aware that they can't have the same plodding introduction to the new rules as they had with Solvency II. Everyone involved knows that they have the time now, with the 12-month PRIIPs delay, to get things right, so we expect all involved to be better prepared on this occasion. The bellwether for our prediction? Whether the revised RTS are agreed in the early part of 2017





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Silverfinch, a look-through and data distribution hub for client regulatory reporting, has issued its 2016/17 review and outlook.

What happened in 2016…

The whimper: after years of planning, and a process riddled with delays, Solvency II is up and running, but instead of a full-on implementation, what we have got is a piecemeal introduction, with many smaller insurers given a pass on submitting key data during the first year. Will future implementations of regulations be the same? Only time will tell.

The achievements: that is not to say that the industry has not achieved a significant amount during the year. Both investors and asset managers are taking a more strategic approach to regulation, realizing that applying the rules is a cost of doing business that can be managed and turned to their advantage. There's hearsay evidence that some companies are reporting increased business due to being able to fulfil the regulatory requirements of their partners.

The look-through failure: insurance firms have focused on the Solvency Capital Requirement (SCR) element of Solvency II, while data reporting has taken a back seat. There is little progress on achieving look-through, an issue that will have to be tackled sooner or later.

The contribution from asset managers: the asset management industry and associated trade groups have stepped up to the mark when it comes to regulatory reporting. The Tripartite Data Model (TPT) provides a sound basis for developing Solvency II data reports and has been accepted widely across the industry. Likewise, the achievement of the European Working Group (EWG) in delivering the European PRIIPs Template (EPT) shows what can be done when the industry works together to achieve an outcome.

The delay: however the year ended on an uncertain note when the European Parliament rejected the initial level II Regulatory Technical Standards (RTS) for PRIIPs (packaged retail and insurance- based investment products). The European Commission eventually realized the game was up for a January 2017 launch and delayed the introduction by a year.

…and what awaits us in 2017

The pressure: this is the year that Solvency II really beds down, and no one expects the same kid gloves approach for companies over the coming 12 months. Some regulators (such as the Irish for example) are already insisting on full compliance for look-through. Pan-industry end-of-year reporting for 2016 means that we will have a clear idea of the failures and successes of Solvency II in coming months.

The tsunami: while companies will be focused on getting Solvency II right, at the same time they will have to prepare for PRIIPs and MiFID II. Will they have the resources to tackle all at the same time?

The unified strategic approach: it will become evident that regulation is not a series of individual events but is instead an ongoing programme that requires management at the highest level. More companies will adopt strategic regulatory programmes and bring in help from outside data management contractors. Both asset managers and insurers will revisit tactical implementation to automate processes and build scalability and client regulatory reporting.

The sales imperative: banks, insurers and fund managers will see more clearly how their sales are determined by their response to regulation. With Solvency II there was an implied restriction on selling funds should asset managers not be able to provide the data needed for insurance clients. With PRIIPs that imperative is made explicit – without the right information in place you will not be able to sell your financial products.

The lesson learned?: with MiFID II and PRIIPs on the horizon in 12 months both industry participants and regulators will be acutely aware that they can't have the same plodding introduction to the new rules as they had with Solvency II. Everyone involved knows that they have the time now, with the 12-month PRIIPs delay, to get things right, so we expect all involved to be better prepared on this occasion. The bellwether for our prediction? Whether the revised RTS are agreed in the early part of 2017



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