Of course, Solvency II has not gone away. The new solvency requirements will be implemented. But the lull in urgency to meet an enforcement date is triggering a predictable and understandable reaction from those insurers that are responding to Solvency II with a compliance approach rather than a best practice corporate governance and risk management approach.
The ‘compliance only’ firms are easing off their SII projects, taking a well earned break from the stress and expense, and re-allocating resources to the many other initiatives that are needed to improve business performance and efficiency. But what will become of their Solvency II progress-to-date?
With contractors and external consultants being let go and internal project teams being down-sized or disbanded, there’s a risk that the work and, as importantly, knowledge generated during the last months or years will be lost. Naturally, some of the work is likely to be already in use in the business as usual environment. However, it’s unlikely that all the work-in-progress is in a condition that a fresh team can pick it up and run with it in the future. There’s a risk that corporate memory loss will cause a frustrating and costly restart to many Solvency II projects.
What will mitigate this risk of memory loss is to think ahead to the Solvency II restart in terms of preparing for the start of a normal project. A project addressing change in a firm requires an as-is analysis of the current situation, and demands documentation around the processes, data, systems and people involved. In the Solvency II stand-down case this goes further than simply creating a repository of files, plans and part completed software code related to Solvency II. A simple repository, however well organized, will not provide a clear articulation of the relationships between all the players and moving parts, and the intended direction and roadmaps that were originally in mind.
With a complete as-is analysis the next generation Solvency II team will not have to reinvent the wheel or repeat mistakes. If the analysis is done well it can even point the next team to ways of creating an even better Solvency II regime within a firm than had originally been intended. This might include making the Solvency II analysis and reporting processes more streamlined, efficient and better controlled, resulting in a genuinely good Solvency II solution for the firm, rather than a grudgingly good enough solution.