The Search for Solvency II Solutions

Ellis highlights structured products as an area where the availability of data remains a challenge. He says that when his team did a request for proposals for the structured products data, they found that although some of the data exists in prospectuses, "more than 50% of what is being asked for is not systematically available."

Licensing Issues

When TPAs do source data from vendors, they have concerns about the financial consequences for the insurance clients to whom they will pass the information. If the insurers re-use the vendor data they receive via their TPAs, they will have to pay the data vendor.

"If we take the credit rating for a government bond and we provide that to 10 insurance companies, we have to pay for it and all 10 companies have to pay for it," says Lawrence. "From a cost perspective, a lot of insurers have been shocked that, in addition to the vast amount they have spent on Solvency II programs to date, they are also going to have a substantial ongoing cost base for furnishing the information in respect to the quantative reporting templates (QRTs) and the solvency calculation."

State Street has responded to this data redistribution challenge by building a metering system so that it can monitor its clients' use of vendor data, but the firm and its fellow TPAs are continuing to lobby data vendors to minimize the costs charged to their insurance clients. "If we send an insurance client the data they need for the QRT reports, it goes across roughly eight to 10 different vendor licenses and, at the moment, the insurer would have to pay for each of these licenses in full. So we have lobbied for [a situation where] if you have an insurance client who only requires QRT data elements, they should be able to get them at a reduced rate," says Ellis.

None of the data vendors contacted by Inside Reference Data would discuss their licensing arrangements.