Solvency II Under the Bonnet: Building the Risk IT Architecture that Serves Your Business Strategy

July 7, 2010
Case Studies



Solvency II is pressuring insurers to move away from ad hoc analytics towards industrialized risk management. In a recent Oliver Wyman survey, leading European insurers were asked to name “enablers” for meeting these demands and major obstacles to success. Most had the same answer to both questions: technology.

A gap has opened up at most insurers between the expectations for IT’s provision of risk-based measures into business as usual, and what is actually being delivered by their Solvency II programmes. In Solvency II Under the Bonnet: Building the Risk IT architecture that serves your business strategy, Oliver Wyman identifies the four most frequent challenges that underlie this risk-technology gap:

  • Neglecting risk requirements beyond the Risk & Actuarial function
  • Failing to deliver industrial-strength risk data
  • Failing to install extended IT processes and governance – professional, but flexible
  • Insufficiently preparing the IT infrastructure

For each of these four issues, Oliver Wyman draws from extensive experience with Risk IT in the context of Solvency II and Basel II to outline tried-and-tested solutions to close the gap between expectations and actual delivery of risk technology. Ironically, most risk technology gaps are actually driven by too much focus on risk technology, neglecting to address the nature of the required change: go beyond model-centric silos, embrace the uncertainty with an iterative program that can cope with a moving target, appreciate the brownfield nature of the change, and engage in the necessary cultural change.

"Many insurers focus their Solvency II programmes on an upgrade of risk modelling capabilities. This causes ‘model-centric silo thinking’ that neglects the overarching cultural change that Solvency II requires,” Dietmar KottMann, partner at Oliver Wyman and one of the authors of the report. “The resulting gap between expectations toward risk technology and the actual delivery is acutely endangering the success of several Solvency II projects – just as it caused some Basel II projects to run into serious trouble."

This report provides perspectives to examine common issues and proposes tried-and-tested approaches for dealing with them. It is also intended to be a guide for insurers and solution IT planners for Solvency II initiatives. 

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
Tel: +1 212 345 1366

Europe (London)
Chris Williams
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
Tel.: +81 3 3500 3023

Table of Contents

Out of sight, out of mind?


Meeting requirements beyond the Risk & Actuarial function


Industrial strength risk data


Extended IT processes and governance


Preparing the system and IT infrastructure and architecture


Closing the gap


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