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English
German
In many cases, insurance companies are still looking for an efficient and flexible operating model - in terms of organization, processes and IT. We support them with our project expertise and develop tailor-made solutions to optimally manage finances, risk and compliance.
Stefan Geipel, Partner
Challenges
Efficient operating model, modernization of data and IT architectures, implementation of sustainability requirements, state-of-the-art management logic
The financial and risk areas of insurers have been significantly expanded in terms of personnel and structure over the last ten years due to the sharp increase in regulation (including Solvency II). Many requirements have been implemented under high time pressure and with a view to pragmatic delivery capability - less so in terms of efficient and resource-saving processes. As a result, the repetitive creation of standardized financial formats is often characterized by manual intervention and high personnel costs for data procurement and quality assurance. Many CFO departments in insurance companies are therefore not working cost-effectively and are coming under increasing pressure to optimize their operating model.
Part of this challenge is outdated system and data architectures that do not ideally support efficient operations from a technical perspective. In many cases, data management in financial areas is highly fragmented, which makes it considerably more difficult to obtain data to generate reporting and notification products and to carry out analyses relevant to management. Outdated and poorly integrated system landscapes with numerous “isolated solutions” and frequent use of MS Excel lead to lengthy processing procedures and high personnel costs.
Another current challenge for finance departments is the sustainability transformation: a sustainable orientation of capital investment, the integration of sustainability risks into risk management and the measurement/management of the CO2 corporate footprint are on the CFO/CRO agenda and must be implemented pragmatically depending on the company-specific level of ambition.
Finally, the finance departments are required to keep their management logic up to date in order to make the impact of strategic business decisions on key financial indicators in the areas of profitability, growth and risk calculable and to further establish themselves as strategic business partners.
Insights
Through the consistent automation of repetitive standard processes, an efficient and agile organizational structure and the use of digital technologies, finance departments can reduce their costs and free up capacity for more value-adding activities. The further centralization of data storage and the use of integrated and modern system solutions support the transition to an efficient and flexible organizational model that also meets future regulatory and internal requirements.
The implementation of sustainability requirements must be considered holistically and with a sense of proportion so as not to overburden the financial organization and to enable a forward-looking orientation.
The further development of the management and risk model is geared towards the growing external and internal requirements and enables tailored support for the divisions and investments with financial information relevant to management. Asset Liability Management plays a central role at the interface between underwriting and investment by making the effects of management decisions on the balance sheet and income statement of insurance companies transparent and identifying levers for increasing investment income. Risk management also provides management impetus on the basis of scenario analyses and stress tests for all relevant risks and current macroeconomic developments.
Solutions & fields of action
Efficient operating model for finance units
To reduce operating costs in finance units, we often start client projects by refocusing the finance product portfolio: we systematically eliminate standard reports that the management considers to add little value, and we merge related formats, thus reducing reporting to the bare essentials. The second step is to conduct a market comparison based on our zeb.finance benchmarking: a comparison with the departmental structures of efficiently organized companies reveals fields of action and efficiency potential in the finance area – from which we derive a target operating model. Based on this target model, we support our clients’ operations in automating repetitive standard processes, e.g. through RPA (Robotic Process Automation) and AI, as well as in developing modern organizational and departmental structures – especially at the interface to IT.
Another key lever to realize efficiency potential in finance units is the data and system landscape (see IT transformation). All in all, we frequently manage to reduce the operating costs of our clients’ finance units by more than 20%.
IT transformation
Setting up a modern system and data architecture is crucial when optimizing the operating model and accelerating finance processes. We help our clients implement centralized data models (data warehouses, data lakes, etc.) to reduce the resource requirements for data provisioning and data quality checks and to increase data quality. Introducing modern finance systems such as SAP S/4HANA or alternative solutions helps to accelerate and digitalize processes. We advise and support our clients in all stages of system selection and implementation – from the design of the business and IT target architectures to data migration, test management and go-live. For SAP projects, we have a team of experienced SAP specialists.
Digital reporting is another lever to boost efficiency and speed, but also to increase the user-friendliness of reporting. We supply practical templates, tools and application examples for modern, digital reporting concepts and are familiar with tried and tested implementation options for different starting points and ambition levels.
Sustainable finance: ESG solutions
One of the most important fields of action for the sustainable transformation of an insurance company is the alignment of its investments towards sustainability. We support our clients with practical know-how in specific implementation issues: How can the regulatory reporting requirements resulting from the Taxonomy Regulation and Disclosure Regulation be implemented pragmatically, e.g. in PAI (Principle Adverse Impact) calculation? How should sustainability considerations be integrated into the investment process from a strategic and tactical asset allocation perspective? How can sustainable backing assets for life insurance products be ensured in the context of Article 8 or Article 9 products?
In addition to investment, sustainability transformation in finance also affects risk management and business economics. We supply field-tested approaches for integrating climate risks into the risk management process as well as pragmatic models for quantifying them in the context of the ORSA stress tests required by supervisory law. Best-practice approaches for measuring (carbon accounting) and reducing company-wide CO2 emissions complement our range of services in this area.
Investment management / ALM
We help our clients to increase their capital investment income long-term. The key lever for this is the systematic professionalization of the strategic asset allocation process – in terms of both business/methodology and technology. With the help of modern asset allocation tools utilizing scenario-based optimization logics (ESG: economic scenario generator), more efficient and higher-yielding portfolios can be generated. We supply the required implementation know-how as well as an overview of technological solutions available on the market. In addition, we have a clear view of how to integrate investments into asset & liability management for corporate management purposes and can provide further impetus for earnings growth in this area. Advice on the implementation of sourcing models (both outsourcing and insourcing) complements our range of services in capital investment.
Corporate & risk management
Modern corporate management creates transparency about the profitability of individual units and business lines or insurance companies. Commercial law, regulatory and economic perspectives must be considered holistically to ensure an integrated risk-return management. This requires sound KPIs, an efficient capital management framework and tools for quick scenario analyses. We have best-practice examples and tried-and-tested solution approaches in this area.
Such management tools are the basis for using the finance capacities freed up by more efficient operations (see “Efficient operating model”) to provide even closer and more collaborative support to the business units. CFO units of the future make business segment strategies quantifiable and, as business partners, provide clear orientation through facts and figures to answer the key question behind every business case: How do strategic business decisions affect the complex and interdependent mesh made up by balance sheet, income statement, risk metrics and growth prospects?
Modern risk management must, among other things, consider “new risks” such as climate or cyber risks and derive the right management impulses for investments and underwriting from current macroeconomic developments (rising interest rates, inflation, pandemic, economic growth). zeb supports your corporate and risk management units with practical know-how and innovative ideas from numerous client projects.
