Regarded as the “Basel of the insurance world,” Solvency II will impose new obligations on insurers and reinsurers operating in Europe. And with 2012 fast approaching, it is just two years until C-Day (compliance day). January 2014 is the latest amended date from the Financial Services Authority (FSA). If this deadline isn’t in their diaries already, insurers and reinsurers will have a Solvency II shaped New Year’s resolution come January 1, 2012.

Solvency II fundamentally reviews the capital adequacy regime for the European insurance industry. It aims to establish a revised set of EU-wide capital requirements and risk management standards that will replace the current solvency mandates.

Meeting these new requirements won’t be possible without the enterprise risk management frameworks that will demand clean and timely data for portfolio valuation that is capable of standing up to close scrutiny. The data-centric connotations for an overhaul of this stature are huge from both a collection and reporting standpoint.

The recent Solvency II: Internal Mode Approval Process (IMAP) Thematic Review Findings report from the FSA highlights serious concerns regarding insurers’ capabilities to deliver accurate data under Solvency II. According to the report, “Few firms provided sufficient evidence to show that data used in their internal model was accurate, complete and appropriate.”

But what exactly does it mean for data to be “accurate, complete and appropriate”?

Let’s start with appropriateness. The language of the regulator states that insurance companies must ensure that their data is “suitable for the intended purpose.”  In this case, “appropriate” is an industry specific term. Insurers must prove they are able to cover any and all claims made. In short, their data must be able to demonstrate the ability to cover risks associated with potential claims.

Accuracy is a measure of the confidence that can be placed in the data. It must therefore be error free, consistent, and demonstrably so. Firms need to prove that they are using and applying this data to their undertakings. Sounds like a simple enough ask, but the fact of the matter is that for many firms, data is just not up to the required standards.

And finally, completeness. A complete data set will include a combination of sufficient historic data which gives insurers the full picture of risk, and the necessary quantities of risk data.

Here at Asset Control, we’ve had a similar mantra that reflects the data requirements for Solvency II compliance; focusing on providing financial organizations with accurate, accessible and actionable data. But however you interpret the language of Solvency II, it’s not going to go anywhere and it looks set to radicalize the way the insurance space record and report on their data.