General Insurance Article - FCA & PRA new accountability regime / Solvency II

 “We’ve seen this before with Sarbanes-Oxley, where the regulators are using individual accountability to force organisations to adhere to standards and other key regulatory requirements. “The changes also throw into question the clarity of the rules and if the risk of prosecution under them makes it harder (and more costly) to attract personnel that are willing to take these risks.

 “The ability of these accountable individuals to carry out the necessary diligence is almost entirely dictated by the underlying systems within the organisations. As a result, how enforceable are these proposals? And do they make it even harder for insurers to be competitive in a market that has excess capital?

 “With 80%+ of spreadsheets having errors, clearly the spreadsheet culture is once again up for scrutiny. Reporting can certainly be automated, but success will depend on several factors. Despite the tendency of organisations to rely heavily on a spreadsheet-driven approach to similar reporting tasks, in the case of Solvency II, the risk that this approach might not deliver is too great to ignore. Given all the moving parts that make up the Solvency II landscape, firms will therefore need to act now to make the changes in time.

 “In particular, now is the time to take a careful look at how reporting is conducted throughout your business. Organisations must invest time in ensuring that they can prove compliance. Introducing a few key measures now will help minimise the risk of severe penalties and – arguably much more long-lasting – the danger of personal and corporate reputational damage.”