Fund Managers Express Concern Over Solvency II Data and Reporting Requirements

Category:

Wednesday, July 1, 2015 12:08 pm EDT

Dateline:

London

Public Company Information:

NYSE:
STT

LONDON, July 1st , 2015 — More than one in three insurance professionals and fund managers (36 percent) believe asset management companies are unprepared for providing the level of detailed data their insurance clients will require under Solvency II, according to a State Street survey of 100 insurance executives and fund managers*. Included within this are eight percent who think they are “very unprepared.” 

The survey findings also reveal that even if fund managers could provide the level of data required, 41 believe they would struggle to do so in a timely fashion.

Fund managers also expressed concern that there is a potential for strategic positions being “leaked.”  Some 31 percent think that alternative fund managers will be “very reluctant” to share important and commercial data with insurers under Solvency II for this reason, and a further 56 percent think they will be “slightly reluctant”. Some 65 percent believe fund of funds could be adversely affected by Solvency II because many of their underlying managers could be reluctant to share proprietary data. 

Martha Whitman, head of insurance solutions for Europe, Middle East & Africa at State Street said, “When our clients think of Solvency II they focus on the issues facing insurers, but the challenges can be just as demanding for the fund managers who manage their investments. The level of reporting and transparency required is significant.  We have seen a growing number of fund managers, in addition to insurers, approach us to help address the administration burden.”

When looking at alternative asset classes, given the higher capital charge insurers will have to pay under Solvency II, 10 percent of insurance executives and fund managers surveyed believe insurers will dramatically reduce their exposure.  To help address some of the issues, 43 percent of those surveyed predict there will be an increase in insurers entering joint ventures to change their exposure to alternative strategies and lower their capital charges – replacing their fund structure with direct investments in the area of real estate for capital, for example.

Overall, 68 percent of insurance executive and fund managers surveyed believe that the pressure of Solvency II on insurers will lead to them placing a greater focus on investment strategies that provide more predictable and uncorrelated returns.  However, 14 percent are very concerned that insurers will have a reduced appetite for risk and this, coupled with a low inflation environment, will adversely affect the ability of insurers to meet their liabilities and commitments to clients.

About State Street Corporation

State Street Corporation (NYSE: STT) is one of the world's leading provider of financial services to institutional investors including investment servicing, investment management and investment research and trading. With $28.5 trillion in assets under custody and administration and $2.4 trillion** in assets under management as of March 31, 2015, State Street operates in more than 100 geographic markets worldwide, including the US, Canada, Europe, the Middle East and Asia. For more information, visit State Street’s web site at www.statestreet.com.

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* In April 2015, State Street engaged Citigate Dewe Rogerson to conduct a global survey of insurance executives and fund managers asking them about their views on the impact of Solvency II on insurers and the fund managers who work for them. Using the Preqin database, the survey received 100 responses.

** AUM reflects approx. $27.3B (as of 12/31/2014) with respect to which State Street Global Markets, LLC (SSGM) serves as marketing agent; SSGM and State Street Global Advisors are affiliated.

This news announcement contains forward-looking statements as defined by United States securities laws, including statements about the financial outlook and business environment. Those statements are based on current expectations and involve a number of risks and uncertainties, including those set forth inState Street’s 2008 annual report and subsequent SEC filings.State Streetencourages investors to read the corporation’s annual report, particularly the section on factors that may affect financial results, and its subsequent SEC filings for additional information with respect to any forward-looking statements and prior to making any investment decision. The forward-looking statements contained in this press release speak only as of the date hereof, July 28, 2009, and the company will not undertake efforts to revise those forward-looking statements to reflect events after this date.

Contact:

Noreen Shah
0203 395 7073
NShah@StateStreet.com
@StateStreet

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