The insurance industry is undergoing a digital transformation, and technology is at the core of this evolution. To stay competitive, insurance companies must have technology ecosystems that are efficient, scalable and aligned with current and future business goals. The complex nature of insurance investment accounting and operations requires robust technology solutions to manage diverse asset classes, regulatory compliance and financial reporting. Outdated systems can lead to data integrity issues, operational inefficiencies and significant investment of time and resources from internal staff.
Legacy systems are still very prevalent in the insurance industry, many of which have been installed locally, or “on-premise,” on the insurers’ internal servers, which over time create data silos and manual processes that inhibit efficient sharing of information and reporting across the organization. These challenges hinder staff productivity, timeliness and accuracy of deliverables, and informed investment decision-making. Additionally, the evolving regulatory landscape demands agile and adaptable technology solutions.
Outlined below are three critical questions to ask when evaluating your current technology ecosystem in search of areas for operational improvement:
Question One: Does your investment accounting solution connect directly with front- and middle-office systems and external asset managers?
Trades should be captured in real-time, or at least daily on trade date, and flow to the investment accounting system. Some insurers may achieve this automated straight-through processing with most of their assets; but often, more complex assets, like syndicated bank loans for example, introduce complexities that require manual intervention. We all know having employees spend valuable time on manual data entry is not the best use of their skills and introduces delays in processing and data integrity risk resulting from human error during the input process. Bank loans are a perfect example of nuanced asset classes that most accounting systems struggle to support, as they require higher-touch tracking and processing of data at the contract and facility level. Such required activities include:
A specialized service provider offering robust systems capabilities and expertise in a broad range of asset classes can perform an analysis of an insurer’s current state, introduce best practices and process improvements, and help implement a more optimal future-state environment leveraging automation and modern integration methods. Don’t settle for an offline, Excel-based process due to system and vendor limitations—invest now, and see the dividends pay off almost immediately.
Question Two: Does your investment solution support daily tri-party reconciliation?
Basic cash match functions in legacy systems or simply relying on custody data at the end of each month is a thing of the past. Month-end processes should just be treated as any other business day. Today’s insurers are adopting a daily process:
Insurers also need to think hard about which functions are core to their business that they want to retain internally, and which functions are either low value-add and ripe for automation or are so specialized that they would be better off outsourcing to an expert service provider. By splitting operational functions in this manner, internal staff can be freed up to perform higher-value functions such as yield and income trending analysis, cash flow modeling and reporting, rather than spending significant time on manual data aggregation, reconciliation and exceptions/break remediation activities.
One way to accomplish this is to work with a competent service provider to automate the aggregation and reconciliation of data from custodians, trade order management systems and external asset managers, and be the first line of defense in reaching out to relevant interested parties to fix any breaks or exceptions. That way, your internal insurance team only needs to be involved at an escalation point, for example, if a third party is unresponsive or all avenues have been exhausted to resolve the issue. A competent outsourcing provider can also provide your team with real-time dashboards and other key performance indicators (KPIs) to ensure they have all current statuses and information at their fingertips to assist when an escalated issue requires their involvement.
Question Three: Does your investment solution streamline operations and accounting for all asset types, including alternative and private credit instruments?
Insurers, particularly life companies, have been increasing allocations to both alternative assets and private credit, including closed-end fund vehicles like private equity, real estate and debt funds, and commercial and residential loans. While these can be attractive asset classes for chasing incremental yield, they carry with them additional operational nuances requiring the collection of a myriad of non-standardized documents and notices from general partners, agent banks, loan originators and servicers.
Your investment solution should do more than just perform investment accounting for your mortgage loans and partnership interests, producing the required NAIC Schedule Bs and BAs; it should also help streamline the collection, tracking, digitization and processing of documents from underlying fund managers, lenders and servicers—bringing added scalability, accuracy and efficiency to your accounting and reporting functions.
Certain service providers have extensive private asset expertise and technology that can add value to your investment operations by:
Having the flexibility to pursue new alternative investment opportunities without limitations or delays is critical. Engaging the right alternatives technology and service provider can eliminate the added burden on your internal staff of having to chase down fund managers and lenders for late documents and then input them by hand at month, quarter or year-end.
SS&C Singularity Can Help
By addressing these three questions before you choose a solution, you help facilitate a seamless implementation process. SS&C Singularity is a cloud-based, artificial intelligence (AI)-powered platform for insurers and investment managers. Native features like embedded AI and Intelligent Automation (IA) technologies can enable you to automate and accelerate real-time and daily operational processes, bringing added scalability while freeing up your internal staff for higher-value functions. Singularity is also supported by experienced, tenured SS&C service professionals who can take on some of the lower-value operational functions as an extension of your staff, while still providing the transparency and oversight you need to feel confident the job is getting done in a timely and accurate manner.
Download our "5 Things to Look for in an Investment Accounting Provider" infographic to learn more about what to look for in an investment accounting provider, or request a demo.