Golden Copy: Wishing You a Solvent Summer

With the US Memorial Day weekend (and UK spring bank holiday) nearly upon us, marking the start of summer and reminding us that we're nearly at the halfway point of 2016 (already!), let's take a quick look at progress toward Solvency II compliance before putting work aside.

Since Solvency II, the European directive for capital adequacy in the insurance industry, took effect at the start of this year, with reporting of data to the authorities begun in April, it might seem like the work is complete. That's not exactly the case.

Henderson Global Investors, which has £92.7 billion ($142.1 billion) in assets under management, began testing Solvency II templates in October, and is still working on adjustments to improve the accuracy of the data.

Having seen several regulation and standards efforts be implemented over the years, it's par for the course that even after a deadline date—whether for the regulation taking effect, or for actual reporting to take place—no regulator is going to show up with a SWAT team to catch problems on day one. Mainly, they want to see that firms' efforts are in place. The dates are guidelines for firms to know that they should be ready for inspections or audits under the regulation by a certain time.

One question about Solvency II, since reporting has now started, is whether it will be effective in its stated goal of ensuring capital adequacy through more complete and accurate reporting.

As Solvency II is also relevant for financial firms outside of the insurance sector, another question for those firms that have invested resources in ensuring compliance – as noted in this column in December – is whether there are synergies to be had with data compliance efforts that still have to be done for MiFIR and other upcoming regulations.