The recent financial crisis has led to more demanding regulatory requirements. The eventual implementation of Solvency II standards will result in more complex financial, market and capital structures that will, in turn, force insurers to become more transparent in terms of their investment portfolios and to adopt a look-through approach to their investment assets and risk management.
A look-through approach enables a refined level of asset monitoring and risk management based on the availability of more detailed information on investment assets and pooled funds’ exposure to market risks. More information, however, can make the task of managing pooled vehicles more demanding, and may require modifying organizational and technological structures.
A successful look-through implementation should start with defining the implementation approach and roadmap. By reviewing their investment mandate, focusing on IT architecture and evolving the company’s governance structure, insurers will be able to complete the implementation of a look-through approach quickly and efficiently.