SAP Insurance Analyzer, one of SAP’s newest analysis applications, provides an integrated financial and risk architecture that helps insurance companies comply with new IFRS 4 accounting principles and Solvency II guidelines.
1. What do IFRS 4 and Solvency II mean for companies?
IFRS 4 is the first international accounting guideline for insurance policies to be created by an international panel of experts. Its final version is expected at the beginning of 2015. Solvency II, meanwhile, is a directive adopted by the European Union (EU) to reform insurance supervision in Europe. These two planned laws are aimed at ensuring that insurance companies have adequate capital at their disposal to reduce the risk of insolvency, and that key functions such as risk controlling and internal audits are firmly anchored within their organizations. Solvency II was supposed to have come into force at the start of 2014. But this date is likely to be postponed because of complex discussions following the just-completed long-term guarantee assessment, an investigation into the creation of long-term guarantees under Solvency II.
Solvency II long a priority issue for companies
Companies have already begun addressing both issues, despite the uncertain timeframe for the regulations’ official release. “Most companies have been getting ready for the introduction of Solvency II for many years now,” says Volker Mohr of SAP’s insurance business unit. The situation is more diverse in the case of IFRS 4, since not all companies will be affected by that planned regulation.
2. What is SAP Insurance Analyzer?
SAP Insurance Analyzer is software for financial and risk management for use by insurance companies. It is made up of two components: SAP Accounting for Insurance Contracts and SAP Solvency Management for Insurance. The solution supports the new requirements for assessing insurance policies and for calculating the necessary solvency capital. It’s been on the market since the end of May.
3. What does the solution offer?
SAP Insurance Analyzer offers an integrated finance and risk architecture. According to Mohr, there is a large overlap between the two new planned regulations, and several areas of Solvency II are based on existing International Financial Reporting Standards (IFRS). “Both standards are developing in parallel,” he explains. The consequence for insurance companies: They’ll need some of the same data, systems, and processes in both areas. “SAP Insurance Analyzer provides a standardized, shared database for all of that,” says Mohr.
Preconfigured data model for source and results data
4. How does SAP Insurance Analyzer help in data management?
SAP Insurance Analyzer includes an integrated, preconfigured insurance data model for source data and results data. Source data frequently comes from many different sources, says Mohr – such as from an insurance company’s business partners or from legacy systems and claims systems. SAP Insurance Analyzer helps integrate this wide variety of sources onto one platform. By maintaining source and results data centrally in a standardized data model for both issues, it also eliminates redundancy.
Next page: Keeping pace with the newest standards
5. Does SAP Insurance Analyzer solve all problems caused by a fragemented system landscape?
According to Mohr, the system landscapes of many insurance companies are highly fragmented. “So it’s frequently necessary to transfer the data to a consistent model first,” he explains. Of course, SAP Insurance Analyzer alone cannot solve the problem of fragmentation of transactional systems. But companies can use the software package to transfer their finance and risk management data to a central analytical data model.
6. Does SAP Insurance Analyzer keep pace with newest standards?
“Our aim is to continue developing the product in tandem with new provisions and standards,” says Mohr. Future regulations can also be integrated in SAP Insurance Analyzer, he says, “but that is much more difficult if a company builds a monolithic solution for each and every regulation.” According to Mohr, regular business content updates are planned.