Half of insurance company managers in a survey say their systems are customised with ‘obsolete code’, meaning they will struggle to adapt to complex regulatory requirements.
The survey by Northern Trust also found that the majority of respondents expect a quarter of their staff to retire in five years.
“Insurance companies will require data in the right format and right degree of detail in order for their systems and processes to work,” says Andrew Melville, head of insurance product and strategy, Europe, Middle East and Africa.
“As many of their legacy systems have been modified by multiple programmers over the years with little documentation, maintaining these existing systems will similarly be a challenge as programmers retire or leave the company.”
Insurance firms in Europe must meet strict new reporting requirements under Solvency II, a piece of regulation designed to ensure the solvency of the insurance industry. In the US, insurers must meet similarly demanding conditions under the Dodd-Frank Act.
The Northern Trust survey included 250 senior investment managers at insurance companies in the US and Europe, each with assets of more than $1 billion (€730 million).
Only 30% of respondents said they had no concerns about their systems meeting future regulatory requirements.
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