Insurance investment firms have a lot to juggle these days—striving to increase returns in a difficult and volatile market, navigating a complex regulatory landscape across multiple states and geographical jurisdictions, and simply having to do more with fewer people. One thing they should not have to face is an investment accounting struggle caused by their technology or service provider.
Our team recently attended a leading conference for North American insurers, IASA Xchange, and it became readily apparent in conversations with both small and large carriers that service gaps in the insurance investment accounting area are widening. For example, some insurers cited a lack of knowledgeable and responsive staff who can consistently service investment operations and accounting and regulatory reporting requirements. High turnover rates among some outsourcing partners may be driving this situation, but whatever the reason, if the provider lacks appropriate technology and experience to manage this and other business challenges, problems can arise.
Is your investment accounting provider up to the challenge?
Insurance investment accounting is highly specialized and has grown increasingly complex. This is because investment portfolio compositions themselves have increased in complexity, and the stakes are high when managed incorrectly. Errors or missed deadlines have costly consequences that can come in the form of fines, reputational damage, lost revenue, increased risk and exposure and wasted resources. Any service gap, including one cited above, can put you at risk for such consequences. To help you evaluate whether your firm is at risk, here are five key things that every insurer should expect from their insurance investment accounting partner:
- Custodial data sourced in an automated fashion by your service provider without requiring you to manually fill out templates – AI-based technologies and infrastructure such as natural language processing, optical character recognition and machine learning have come a long way in recent years. They have paved the way for some providers to automatically collect, ingest, read, parse and process data from various non-standardized documents and data sources. This allows domain experts to review and verify the data in a more timely and efficient manner. Your investment accounting provider should not be asking you to do the manual grunt work you are paying them to eliminate.
- Strong SOC1 control environment with independent checks and balances that both you and your auditors can rely on – A strong control environment is critical to ensuring complete, accurate and timely validation of your investment data. This should include proper reconciliation procedures, data access and security protocols, as well as asset valuation, classification, rating and reporting checks and monitors to ensure proper reporting on the appropriate NAIC schedules. Your investment accounting provider should not only have these controls in place, but should also be able to demonstrate such controls and SOC1 compliance on-demand to regulators or auditors.
- Open lines of communication with a knowledgeable, responsive and accessible team supporting you, so you always know whom to call – While staff retention is a challenge many firms are currently facing, this should not translate into a problem for you. You should always have a knowledgeable person servicing your account as well as access to a dedicated team of seasoned insurance investment accounting experts who can promptly address issues, requests or concerns. You are paying your investment accounting provider to understand the nuances of your business, and they should not be subjecting you to recurring “key man risk,” where you are consistently forced to retrain junior or inexperienced new staff members due to turnover.
- All public and private assets on a single system because managing private equity investments in a spreadsheet exposes you to risk and human error – Increasing your investment exposure or allocation to private investments should not require you to add technological or operational complexity or unnecessarily increase risk. Platforms are available today that can accommodate the efficient processing, accounting and reporting of both your public and private investments on a single system, enabling you to diversify your investments while holistically managing risk and exposure.
- Timely, accurate deliverables with transparent service levels so you can meet your month-end close timelines and quarterly/annual STAT filings – Your insurance investment accounting provider should be able to provide you real-time or near real-time transparency into their operational process and your investment data. You should know where you stand at any point in time, with both governance and transparency, to collaborate for resolution of any errors, missing data or exceptions well ahead of month-end closes. High transparency will also ensure more timely and accurate closes while alleviating unnecessary fire drills at quarter or year-end when it comes to regulatory filings.
If you are not receiving responsive support in all five areas detailed above, there are firms who can fill the gaps.
Look for a North American-based insurance accounting outsourcing partner with a platform that leverages AI technology for analytical insights, operational efficiency, and accounting and reporting flexibility—all in one application. They should bring a deep, credentialed team of tenured insurance-dedicated professionals to the table. This team should offer insurance accounting and regulatory reporting expertise across both public and private investments to help ensure timely period closes along with reliable and accurate NAIC Quarterly and Annual Statutory statement and footnote disclosure preparation, quality control review and filing assistance. Your partner should also be readily available to assist with any transaction and GL detail, reconciliation, asset valuations, pricing or financial reporting questions.
SS&C can meet all of these requirements and more. If you would like to learn more, watch this short video. You can also contact us.
