Managing Solvency II Programme: There’s more to it than a RAID!

Solvency II is by far the largest finance change programme undertaken by insurers in recent years. And, probably the most complex till date. But the complexity does not end there. Given the nature of change involved in delivering Solvency II and the timelines, the Solvency II Programme Director finds himself at loggerheads with other Business As Usual (BAU) projects and finance projects managers. An organisation cannot afford to wait for Solvency II to deliver compliance before it can initiate other changes – most changes need to happen simultaneously! And often, the deliverables are at cross purposes to each other.


The finance teams of UK insurers are grappling with some key changes in their current operating model – IFRS, MCEV proposed changes around reporting; implementation of TAS standards for actuarial reporting to name a few. These changes are directly impacting the deliverables of Solvency II workstream. Unless the proposed changes by the respective teams are discussed and agreed, insurance companies will waste significant time doubling the deliverables at the best case, or undoing previous deliverables at the worst.

The Solvency II programme suffers from an inherent weakness of not being able to define the exact deliverables for each of their work stream, as the requirements are still emerging. Two weeks ago, CEIOPS has delivered another set of documentation which are currently being analysed for impact by the actuaries. This ambiguity is of no great help to either the Solvency II Programme Director or the other finance change directors! The BAU functionaries have to perform their day-to-day role and they cannot wait indefinitely for Solvency II.

So how does one go about efficiently managing the change portfolio within finance?

My experience suggests developing an Impact Management Framework for this purpose. The framework is a simple tool to identify the current the future ‘conflicts’, map the conflicts and the overlapping areas, broker a possible mitigation plan and continually assess the tool and update it to the conclusion of the impact / dependency.


Impact Management Framework for Solvency II

Given the nature of Solvency II deliverables, it is potentially impacted by, and, in turn could impact a number of BAU functions/projects in an organisation. The proposed framework is a methodology to identify and manage the impacts. The framework is shown in a diagram below.

The framework consists of five steps:

Step 1: Identify

Identify a list of all current and future projects in the organisation. A good starting point is the Change Board or Portfolio Governance function which has a most up-to-date list of the projects. It is useful to validate the list with key functions such as IT, Business Change to ensure that the list is complete. The change function also has a list of future projects which have been approved.

Step 2: Investigate

Typically the starting list will be fairly long. It is not unusual to have more than 100 projects on the initial list. Use a first filter to eliminate those projects which has no potential impact on Solvency II. For example, system upgrades, site enhancements, version upgrades, changes in client facing documentations, changes impacting distributor commissions. Having put the list through the initial filter will give you a manageable list to begin.

Step 3: Assess

For the shortlisted project, investigate the scope of the project, the products/processes/systems impacted to assess if they have interdependence with Solvency II. This is the second filter. During this stage, I do an initial investigation, followed by a quick conversation with the Project Lead to validate my understanding.

At the end of Step 2, you will have a definite list of projects which have potential interdependence on Solvency II.

Step 4: Plan

During this stage, identify the exact areas of overlap between the two projects. The areas could be one of more of the following:

1. Impacting product valuations

2. Impacting financial reporting

3. Impacting financial processes

4. Modifying risk categories

5. Modelling changes

6. Changes to finance data mart

The list above is not exhaustive. You will need to modify the above list based on the functional organisation and the prevalent project life cycle in your organisation.

For the external projects (i.e., those other than solvency II), identify the areas of overlap, their delivery time line and the resource utilisation. The delivery timeline needs to be compared with that of the relevant work packet of Solvency II programme. The comparison should result in a mitigation plan with defined activities at pre-defined time to ensure that the interdependencies are tracked. Given the evolving requirements of Solvency II, a typical mitigation plan can be to reassess the interdependence. For those work packets within Solvency II where the requirements are clear, a mitigation plan can be picking up relevant deliverables of external project and including it within Solvency II deliveries.

Step 5: Mitigation

This step refers to activities in the future where Solvency II work packet manager and the external project manager need to re-assess the identified interdependencies. The mitigation plan should be included in the main Solvency II programme Project Plan to ensure their monitoring.

I have found it a good practice to be in regular contact with the change board to ensure that new projects are brought to my attention immediately. It is a relatively simple task to communicate the potential dependencies early in an external project’s plan, than doing so at a later date.

The list of dependencies does not end here. Solvency II programme need to be cognizant about the forthcoming papers from the European Regulator, resource availability among a host of potential dependencies. I will cover them in a later blog.