Solvency II – Does BPM hold the key to painless compliance?

Solvency II has forced insurance companies to relook at the business in a holistic manner – an end-to-end value chain consisting of internal and external business processes comprising of risk, finance, policy admin through to sales and distribution. No longer can executives afford to think of their functions as ‘islands’. There is an urgent need to stitch the disconnected systems, processes and stakeholders in a single ‘eco-system’.


Insurers since long have been having a flirtatious relationship with Business Process Management (BPM) tools. I guess, the time is ripe for BPM tools to shine and rescue the insurance companies from their plight.

So, how can BPM help insurance companies meet their Solvency II compliance?

Solvency II, in a nutshell, is about creating transparent processes across the organisation, which would help executives to get a pan-enterprise view of risk. The three pillars are built around identification, quantification and reporting of the risk to the regulators. In order to achieve this, insurers are building/revising their risk management frameworks. A Risk Management Framework (RMF) in a nutshell is an integrated view of risk management including consistent processes for analysing, evaluating, mitigating and communicating risks. RMF will enable an insurer to bring together a risk-based procedure, governance structure and integrated methodologies where the relationships between processes, risks, controls and regulations are made more visible.

BPM tools can help companies meet this challenge effectively. The formal processes, once approved by the regulators can be built using BPM and deployed in the organisation. Workflows are best placed to build governance structures to manage risks with built in triggers to escalate to appropriate roles in the organisation, should the need arise. Reporting (Pillar 3) can be delivered with greater certainty using the dashboards.

Solvency II is not ‘one-off’ compliance. CEIOPS expects insurance organisation to embed a culture of risk within the organisation, using Internal/Standard Model and Use tests to validate their risk management frameworks and constantly improvise the results for better quantification of risks. Building a ‘one-off’ compliance for Solvency II would entail repeated enhancements to the systems and processes. As against this, BPM tools provide the flexibility to dynamically change the processes with minimal costs and minimal down-time.

Documentation is another area of concern for insurers and regulators. CEIOPS has published guidance on this topic and insurance companies are expected to maintain comprehensive documentation on the processes with detailed explanation. While companies have been exploring Sharepoint and similar tools for this, I strongly recommend using the document management capabilities in BPM for this purpose. The document management capabilities in a BPM tools provides for scenarios where documents need to be accessed by a large group of people who need to collaborate on them. Another point in favour of BPM!

Many insurance companies have successfully deployed BPM in some functions (or majority of functions) in their organisation. It is the perfect time to extend the deployment to cover critical areas which would also help them comply to Solvency II.