The bottom line is that Solvency 2 is all about improving risk management in insurance, it is about good governance, good controls and good information ...... one might comment that it’s just ‘best practice’ for any organisation...... and that’s certainly true, but, and it’s a very large but, we only need to refer to the recent global financial crisis to evidence failure of a catastrophic nature in well known and trusted brands not being able to manage risk effectively.

Solvency 2 can therefore be viewed as forming part of a robust enterprise risk management framework. So where should organisations be now?

Solvency 2 is being billed as a marathon and not a sprint, so in essence most organisations will have already identified what they want to achieve from the directive, starting with their overall business strategy. Certainly organisations should now have conducted a gap analysis against the Committee of European Insurance and Occupational Pension Supervisors (CEIOPS) Level 1 and current Level 2 Advice and they may well have a high level Solvency 2 Implementation plan in place.

From Winchester White client research it is clear that a lot of time an effort has already been expended on the quantitative actuarial aspects of Pillar 1, indeed those organisations that are seeking internal model approval and enter the 1st wave pre-application process will have already communicated their intent to the FSA in the second half of 2009. Yet there is mixed response on how well organisations are succeeding in embedding a risk management culture throughout the business; to quote the CEIOPS Chairman “Solvency 2 is not just about capital ..... it is a change in behaviour”.  So risk and risk management needs to be integrated into all aspects of corporate day to day decision making, with risk and capital information being used by the business to inform its strategic decision making.

To succeed, the business needs to have a coherent ‘joined up’ approach.  If there is lack of internal co-operation and silo mentalities prevail then the path to Solvency 2 will be bumpy. What is needed is alignment of information, technology, risk management and business decisions. The business benefits are there for the taking:

• Operational efficiencies
• Reduced capital requirements
• An overall competitive advantage in your chosen markets
• Improved risk management providing enhanced and reliable risk information
• Greater visibility across the business enabling better informed decision making
• Optimised design and purchase of reinsurance
• A more competitive underwriting and pricing strategy
• New product development opportunities

So what should you do next?

• Get the communication right – risk isn’t boring it actually helps you run your business efficiently and effectively
• Check for the continual engagement and involvement of the Board and Senior Management and keep them well informed
• Ensure at the outset that the programme/project team has representation from all stakeholders’ and don’t forget to include your external partner’s e.g. third party providers and outsourcers
• Most importantly seek to win over the hearts and minds of everyone, a one team approach fosters collaboration and breeds success.