How technology can help insurers address regulatory compliance

Maintaining compliance with NAIC requirements can be a race against time, as guidance updates come on a quarterly cadence and require companies to move quickly to make reporting adjustments – often in the same quarter. Guidance updates can arrive right at the end of the quarter, leaving little time to respond.

Each year, the challenge increases when annual updates to the guidelines arrive. They tend to be larger in scope and require organizations to rush to make the necessary adjustments over time.

When new guidance requirements are introduced, organizations must:

• Update compliance reports to meet regulatory expectations, including new classifications, groupings or attributes.
• Correct classification of securities under the new guidelines.
• Ensure business teams understand the impact of new classifications, groupings or new attribute disclosures.
• Make the necessary updates to their holdings to address any concerns arising from the changes.

These activities require significant time and resources, taking attention away from core business activities. Fortunately, technology has enabled insurers to address these challenges in a much more efficient way.

A holistic solution for regulatory compliance

Advanced technology has unlocked access to powerful tools that help organizations quickly respond to and stay compliant with changes in the regulatory environment. For example, some of the key things that technology can help insurers with include:

• Configurable Security Classification: The technology can enable security classification and report grouping functionality to be fully configurable and rule-driven. This allows business partners to quickly update reports when new guidelines are published. Technology takes care of regulatory compliance reporting, leaving insurers free to focus on their core competencies and grow their business.

• Flexible report customization: Reporting needs vary from insurer to insurer, so insurers must be equipped with the flexibility to tailor report columns, content and positions to their specific needs.
• Preview reports: The more reporting insurers can forecast, the better prepared they will be to comply with new guidelines and adapt to NAIC and other regulatory-related workflow changes. Insurers need to invest in technology that allows them to see versioned reports and updates before the end of the quarter or year so they can respond to changes proactively and avoid surprises.
• Smart Asset Classification: Advanced technology can provide an initial classification of assets based on embedded logic, enabling easier review and sign-off and thereby reducing workload for insurers.
• Benchmarking against peers: To supplement reporting and increase performance insights, insurers should also look for ways to benchmark against their peers. These types of insights can help take the guesswork out of how they actually work and uncover potential opportunities they might be overlooking.
• Proactive Compliance Management: SaaS solutions can interpret data uploaded by insurers and apply sophisticated logic, proactively suggesting initial classification to further simplify the compliance process.

Real-world impact: NAIC 2025 changes

In 2023, the NAIC published a major change to their 2025 reports (Definition of Principal Based Bonds); this required the addition of two new reports (D-1.1 and D-1.2) as replacements for the old D-1 report, and updates to 31 quarterly and annual reports. New statistical classifications and groupings and new reporting attributes have been included.

These changes underscored why it is so important for insurance companies to double their capabilities to aggregate, enrich and report complex global investments across all reporting standards – from IFRS to GAAP.

As a result, insurers are turning to technology to help them see the impact of the new guidance on their reports well before 2025. This will help them adapt their client-specific configurations to adhere to the new guidance mandates and see their effects. changes and better prepare to meet internal and external reporting needs in 2025 and beyond.

Innovation continues forward

Of course, regulatory requirements will continue to evolve over time. And with that, insurers are realizing that they need to modernize their operations to help them meet regulatory changes as time goes on. To do this successfully requires insurers to allocate significant resources to try to keep up with the changes each quarter, and so their businesses have increasingly sought to take advantage of technology that will streamline the process and manage automatically much of the heavy lifting.

More importantly, given that regulatory and reporting expectations are dynamic and prone to change, strengthening proactive previewing will be essential to mitigate bottlenecks and remain compliant with regulatory requirements.

By leveraging technology strategies, insurers can stay ahead of regulatory changes, streamline compliance workflows, and focus more resources on core business activities. More importantly, because there is no telling what regulatory changes will occur in the coming years, having a robust technology infrastructure can help organizations optimize their workflows, remain agile and meet emerging challenges for decades to come.