Basel II, Solvency II, charity bike rides and lessons learnt about being prepared


How much time should be devoted to preparing for an important challenge? Depends on the challenge, I hear you say.

From my experience, it is important to be aware of the challenges to be confronted when completing a significant project. Not under-estimating the real effort required, often depends on fitness levels, access to the right tools and prior knowledge or experience of completing such tasks.

I recently finished a charity bike ride, taking the W2W route 20 across 151 miles of some of the most stunning parts of Northern England’s country side. I have completed a number of these bike rides and each time I have experienced one of these challenges I have become a little bit more prepared for the next one: more fit, better equipped, wise to the needs of what the occasional cyclist should expect on a long distance run (normal training is limited to 20-30 miles or 48.28 to 32.18 kilometers). However, it always amazes me that less experienced (lets read younger) guys see no need to train and then are shocked to be left behind after the first hill or the first 20 miles or so (look out for a new bike ride challenge at the end of this blog).

So what have my attempts to kill myself on the highways and byways of England to do with Risk Management and, in particular, the up and coming European Union directive Solvency II?

Well, Solvency II (now expected by 2012) will fundamentally change the way that insurance firms address risk internally. The regulation impacts Insurance firms operating in European Union and will have an impact on banks and insurances alike. The overriding result of Solvency II will be the need for insurance firms to implement sophisticated-bank, standard-capital management processes and models. In banking, regulatory calculation approaches will converge more and more too, impacting how the banks measure economic capital internally.

The increased expenditure on systems, processes and personnel will represent a significant challenge, especially for small- and medium-sized insurers. However, for those firms who are ready to drive forward in risk management, they will not only fulfil the demands of Solvency II but will also strengthen their market position through improved risk intelligence and business intelligence in general.

The key here is one of good preparation, with access to practitioners and tools (bikes are an optional extra) that can provide a roadmap based on proven experience.

Waiting for regulations to come into force, and hoping that suitable “black box" risk management solutions will appear on the market, will result in missed opportunities. As banks that have implemented their own Basel II solutions can testify, the intelligence created by collecting and integrating risk data can deliver a return on investment many times greater than the original cost of satisfying the financial regulator.

To be successful in Solvency II, it will be important to have good, long-term strategic planning. Look for a solid, risk management solution from a vendor that understands the importance of data acquisition, data cleaning and data integration (including contract, claims, agent, insured, physical hazard and market data). All of these steps will be required to update a data model on which the risk analyses will be performed to support Solvency II requirements.

So, as I said at the beginning, in order to reduce the risks & pains around a significant challenge it is important to be prepared with knowledge from experienced (risk) people, good planning, appropriate tools and some pain killers for those nasty hills.

For those who would like to enjoy an exhilarating challenge for charity here is your chance. The XLP Research Trust are looking for adventurous volunteers to cycle from London to Paris 11th to 15th June 2008 connecting two of the worlds most chic cities on one of the best cycling routes in Europe!


About Author

David Rogers

Global Product Marketing Manager - Risk

David is the Global Product Marketing Manager in Risk responsible for SAS Marketing and Alliances for Risk Management solutions and technology.

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