01 July 2015
With just six months until Solvency II comes into force, insurance executives and fund managers remain worried about the data and reporting capabilities of asset management companies, .
A global survey of 100 insurance executives and fund managers, commissioned in April by investment services firm State Street, found that 36% of respondents believe asset management firms are unprepared for providing the level of detail on investment data that insurers will require under Solvency II. Within that figure, 8% said asset managers are very unprepared.
A further 41% believe that even if fund managers could provide the level of data required, they would struggle to do so in a timely fashion.
Fund managers also expressed concern that there is a potential for strategic positions to be "leaked" via the reporting requirements.
Some 31% think alternative fund managers will be "very reluctant" to share commercial data with insurers under Solvency II for this reason, and 56% said they will be "slightly reluctant". Some 65% think funds of funds could be adversely affected by Solvency II because many of their underlying managers could be reluctant to share proprietary data.
Overall, 68% of respondents believe the pressure of Solvency II on insurers will lead to them placing a greater focus on investment strategies that provide more predictable and uncorrelated returns. However, 14% are very concerned that insurers will have a reduced appetite for risk and that this, coupled with a low inflation environment, will adversely affect the ability of insurers to meet their liabilities and commitments to clients.
When looking at alternative asset classes, given the higher capital charge insurers will have to pay under Solvency II, 10% of respondents said insurers will dramatically reduce their exposure.
To help address some of the issues, 43% of those surveyed predicted an increase in the number of insurers entering joint ventures to change their exposure to alternative strategies and lower their capital charges – replacing their fund structures with direct investments in the area of real estate, for example.