1. March 2013 | www.secondfloor.com
Like its counterparts across Europe, in 2010
this leading UK life and pensions provider was
facing a pressing deadline. Its capital allocation,
risk management and governance processes had to
comply with the new Solvency II regulations by 1st
November 2012. The deadlines slipped from the
regulator’s side, but the insurer saw the business
benefits of improving its risk and capital
management capabilities and continued with its
change program.
The insurer already had a functioning but manual
internal model in place for analysing risk and
calculating economic capital requirements across
its diversified lines of business. It was confident its
internal model would more than satisfy the
requirements of the UK regulator, the Financial
Services Authority (FSA). However, the underlying
process and the technical provisions for gathering
the data, calculating the capital requirements and
reporting the results needed urgent attention.
Leading UK Life Provider
Automates Internal Model
Processes for Solvency II
Compliance and Business Analytics
A customised workflow solution from SecondFloor
creates an automated and repeatable reporting
process – delivering benefits that extend far beyond
Solvency II compliance.
The
Problem

2. Manual processes meant deadlines
could not be met
Prior to 2010 this process was a manually-intensive
task, requiring a team of actuaries to assemble
and validate the data, reconcile the outputs from
the calculation engines and format the results into
reports for review by senior management and the
FSA.
This process was time-consuming and an inefficient
use of skilled actuaries’ time. Crucially, it also
meant the insurer would not be able to meet the
reporting deadlines that would come into force
with Solvency II. Before it could submit its internal
model to the FSA for approval, it had to be able
to demonstrate the existence of an end-to-end,
controlled process for producing accurate and
auditable reports within the yearly and quarterly
deadlines.
An automated solution in time for
Solvency II
In early 2010 the insurer initiated a project to
automate its internal capital management activities
using a workflow-driven approach. The aim was to
have an automated, repeatable process to submit to
the FSA for approval, and to have it up and running
well in advance of the November 2012 deadline
then in force, in order to be able to carry out some
‘dry runs’ performing the important and challenging
‘Use Test’ before Solvency II became law.
The key to the project’s success would be unifying
to orchestrate many different involved people,
data sources and calculation engines required to
produce the final reports, as well as the production
of the reports themselves to the required formats
(annual SFCR, RTS and QRTs). Key considerations
were:
• Gathering data from multiple internal and external
source systems
• Reconciling different data models into a single
model to allow calculations to be conducted
Success
Criteria
The
Solution
2June 2013 | www.secondfloor.com

3. • Gaining qualitative sign-off showing that the
data is ready to be transmitted to the calculation
engines
• Passing the validated data to the calculation
engines
• Production of reports for internal management
use and regulatory submission
• Completion of the entire process within a defined
time-window
• Creation of a full audit trail covering every
element of the process.
SecondFloor experts develop a
custom workflow solution
The insurer had hired a leading systems
integrator to manage its Solvency II compliance
programme. The SI recommended the use of a
workflow management tool to create the controlled
processes. When the insurer needed it to be
customised to meet its specific requirements,
SecondFloor experts were brought in to carry
out the customisations as part of the 50+-strong
Solvency II team.
Paul van Rangelrooy, SecondFloor’s project
manager in charge of delivering the customised
solution, says it was a complex project with some
key challenges that most insurers will recognise:
“Like most insurers, this company had quite a few
legacy systems in place, so it was a challenge to tie
down what data was needed, what aspects of the
data needed to be in the internal model, and what
format it should be in before it could go into the
internal model,” he says.
Results
Solvency II requires that each
legal entity produces its own
reports, but the company is
managed in a different way.
That meant mapping the
different legal and business
reporting hierarchies in the
system to ensure the correct
hierarchical reports are
produced for the regulator,
“
”
says Paul van Rangelrooy.
3June 2013 | www.secondfloor.com

4. A customised workflow to meet
specific requirements
Working closely with the insurer’s internal IT team,
the Solvency II programme team, and consultants
from the calculation engine vendor, SecondFloor’s
consultants delivered a customised product to a
fixed budget and within a tight project deadline. The
customised tool provided the following functionality:
• A web-based portal for business users to input
data for internal model calculations
• Integration with multiple source systems,
including finance systems, Excel spreadsheets
and other data feeds for internal model
calculations
• Integration with two core modeling and capital
calculation engines
• Workflow to ensure qualitative validation of data,
under the “four eyes” principle
• User interface displaying the risk models, entity
structures and scenarios enabling users to
modify existing data to conduct ‘what-if’ analyses
Production of reports in Solvency II-compliant
formats.
Following a period of successful integration testing,
user acceptance testing and end-user training, the
solution went live on time in March 2012, creating a
complete, end-to-end, automated and repeatable
process for generating accurate and timely reports
in line with Solvency II reporting deadlines.
Importantly, the solution required no changes to the
insurer’s existing IT landscape, ensuring that the
business was not disrupted during the
implementation.
The workflow solution was submitted to the regulator
for approval as an integral part of the organisation’s
internal model for Solvency II compliance. As the
introduction of Solvency II was subsequently
pushed back to January 2014 and beyond, FSA
approval is still pending at the time of writing.
The insurer has been making good use of the
solution in the meantime, not only by carrying out
‘dry runs’ of Solvency II reporting cycles, but also in
the production of period-end management reports
for use by senior management to direct the
business.
Results
4June 2013 | www.secondfloor.com

5. Benefits that extend beyond Solvency II
compliance
By implementing a workflow-driven solution for
economic capital calculations, risk analysis and
reporting, the insurer is already enjoying several
significant business benefits, even before the
delayed Solvency II regime comes into force. Those
benefits include:
• Greater insight into capital allocations: with the
ability to run reports and scenarios when needed
• Better use of actuaries’ time: enabling more time
to be spent on analysis rather than gathering data
• Reliable data for internal decision-making:
supporting more informed decisions about risk
and capital
• Early compliance with Solvency II: avoiding a
rushed compliance project nearer to the deadline
With an Ernst Young survey revealing in
October 2012* that nearly 69% of European
insurers were having problems meeting Solvency
II data management requirements, the workflow
solution has given this particular insurer a
competitive edge – both in its ability to make
capital-related decisions more efficiently, and in
its advance readiness for Solvency II.
When the deadline for enforcement approaches it
will face fewer preparation distractions and be
able to focus on growing the business in what will
likely be times of greater opportunity than those
in which it spent its energy building a framework
and culture for compliance.
*Ernst Young, European Solvency II Survey, October 2012
Summary
5June 2013 | www.secondfloor.com

6. March 2013 | www.secondfloor.com
For more details please contact
SecondFloor.
About SecondFloor
SecondFloor helps firms to comply and produce
regulatory information efficiently, consistently.
Companies that turn to SecondFloor’ solutions
benefit from timely, complete, accurate,
traceable, auditable and repeatable reports and
analytics. Facilitating stress testing, economic
capital calculations, and regulatory reporting
in complex environments are key elements of
SecondFloor’s credentials that have established
it as a successful enabler of business analytics.
eFrame®
, SecondFloor’s software application,
reflects best practice approaches and project
accelerators learned with clients during years
of experience. SecondFloor is also an IBM risk
analytics reseller.
For more information
contact us on +31 (0)20 6589 700
email us at info@secondfloor.com or visit our
website at www.secondfloor.com
Request a full demonstration
Would you like to have a personalized
demonstration of eFrame®
Solvency II solutions?
Please contact us at info@secondfloor.com
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