It is almost a sacrilege to put The Beatles and Solvency II in the same blog and I know many actuaries would think that John was referring to them in the phrase “He say "One and one and one is three"” but then COME TOGETHER could be a good slogan for the CEOs trying to organize the forces to deal with the directive.
Solvency II brings together business, finance, economics, probability, mathematics, statistics and IT. It is cross disciplinary and as such demands cooperation between all the organization management resources. But, insurance companies, like any other big corporation must divide the work into divisions and departments in order to do their job. There is a big gap inside the industry. The diverse disciplines develop their own culture and their ways to solve problems.
Actuaries of two different companies – or even – of two different countries have more concepts in common than with the accountant that occupies the adjoining room.
The different departments work together and every balance sheet is a proof of that. But the directive requires a degree of collaboration not known till now.
The directive demands active involvement and participation in the governance system from the management. ORSA is an assessment process that demands a joint effort in order to get to strategic decisions.
Other problems lead to the IT. More specifically, they lead to the data quality issue. The data cannot be accurate if the models data doesn’t match the data on the financial statements and the statistical reports. It is very common to the actuaries to create their own databases to feed their needs. According to the directive this cannot continue and there is an understanding in the market that in order to achieve consistency the whole organization must share the same data warehouse.
In the next months and years we are going to see the management staff of the insurance companies coming together. The accountants speaking the double entry language, the investment that recognizes only the cash they can invest, the actuaries, the risk managers and the IT will seat down and define the new language. It will not be easy; bridging the cultural gaps is a big challenge.
Solvency II will drive the management resources inside the company into a perpetual collaboration that, with time, will intensify the partnership and the relationship inside the company.
To relax from the burden we can always enjoy some Beatles.
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