Insurance companies must comply with regulations for investment managers as well as regulations unique to the insurance industry itself. In the United States, insurers must comply not only with rules of the National Association of Insurance Commissioners (NAIC) but also with rules specific to individual states. The increased regulatory burden on investment management practices at insurers is further compounded by increased scrutiny by auditors and the requirement to provide evidence of historical compliance.
These challenges can cause insurance compliance reporting nightmares for even the most rigorous organizations. The good news is there are steps that companies can take to better prepare themselves for audit reviews, saving time and money, while increasing transparency, consistency, and accuracy of the resulting data.
- Capture compliance results at each step in the trade lifecycle:
If guideline rules can be integrated with broader investment data, e.g. positions, and made available to traders in real time, compliance decisions can be automated and auditable with minimal oversight. The more closely data sets are integrated, the more quickly and accurately compliance can be systematically assessed, freeing up expert resources to assess difficult situations rather than perform reporting or manual activities.
- Record failing – and passing – compliance test results:
Regulators require that firms provide evidence of systems and controls to manage operational risk, which means not just identifying exceptions but the application of a control framework in its entirety. Auditors will usually examine not just where activity breaches controls but also where it passes. Tracking both positive and negative affirmations is a best practice that supports a comprehensive audit trail for both internal and external purposes.
- Promote consistent, accurate data with data governance:
The high level of regulatory and client oversight presents unique reputational risks for insurers, who must demonstrate how they know their data is correct. This requires a documented understanding of data flows and business rules, and a strong data governance framework that addresses common data elements and data lineage to promote institutional alignment across different user and stakeholder perspectives.
Documenting data flows is a particular challenge for insurers because of the statutory accounting rules prescribed by the NAIC, which adds an additional accounting framework to consider for front-office investment decisions. For example, one trading decision might reference state regulation, contractual agreements, and internal strategy as rule sets and require input from multiple accounting frameworks to measure compliance.
Improve compliance with an investment data management and reporting platform
An investment data management solution can help automate and simplify compliance reporting while providing transparency across your compliance efforts.
RivvitTM is Grandview’s data management and reporting platform built specifically for investment managers and includes Rivvit-Guidelines, a compliance rules engine that makes it easier to manage portfolios in accordance with governing documents, regulatory guidelines, and asset allocation strategies.
Within Rivvit, compliance rules are modeled based on each client’s unique data sources and conventions with rule templates to calculate issuer limits, concentration limits, weighted average targets, and eligibility criteria.
Today, there’s no reason to operate manual compliance reporting processes. A pre-built investment data management solution can shave hours off your reporting processes, improve transparency, and reduce risk.
