28 November 2014

Gaps in insurers' investment management systems revealed

Insurers' systems and procedures for managing investments are struggling to keep up with changes in regulations and the types of assets bought, according to Celent.

The research consultancy firm has published a report, Mind the Gap, that notes how insurers are increasingly investing in a broader range of assets, that more detailed analysis of investments is being required by regulations such as Dodd-Frank and Solvency II and that consolidated analysis of portfolios and more regular reporting are needed.

"As a result, these business investment demands are exposing significant gaps in existing legacy systems and operational procedures," wrote the report's author Jay Wolstenholme, a senior analyst based in Celent's New York office.

The common deficiencies in systems include the inability to consolidate portfolios in one aggregated view without manual intervention, and the challenge of producing regular reports without costly and error-prone workarounds.

Legacy systems also have difficulties producing real-time analysis and answering what-if questions.

"These 'new normal' disruptors are forcing insurance investment funds to re-evaluate their portfolio management systems and portfolio accounting systems," Wolstenholme said.

There is fierce competition among suppliers, with custodians, fund administrators and vendors all seeing opportunities to provide portfolio management services.

All these options are viable, according to Wolstenholme. Suppliers that can balance cost against minimal operational risk and best-of-breed functionality will win out, he suggested.