How tech can help insurers tackle regulatory compliance

Staying compliant with NAIC requirements can feel like a race against time, since guidance updates come on a quarterly cadence and require businesses to move quickly to make reporting adjustments — often within the same quarter. Guidance updates may even arrive late in the quarter, leaving little time to respond.

Each year, the challenge grows when annual guidance updates arrive. These tend to be larger in scope and require organizations to hustle to make necessary adjustments in time.

When new guidance requirements are introduced, organizations must:

Update compliance reports to match regulatory expectations, including new classifications, groupings, or attributes.Properly classify securities according to the new guidelines.Ensure business teams understand the impact of new classifications, groupings, or disclosures of new attributes.Make 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 allowed insurers to tackle these challenges in a much more efficient way.

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A holistic solution to regulatory compliance

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

Configurable security classification: Technology can allow for security classification and report grouping functionalities to be fully configurable and rules driven. This allows business partners to quickly update reports when new guidance is published. Technology handles regulatory compliance reporting, leaving insurers free to focus on their core competencies and growing their business.Flexible report customization: Reporting needs vary from insurer to insurer, so insurers need to be equipped with the flexibility to tailor report columns, contents, and placements according to their specific needs.Previewing reports: The more insurers can forecast reporting, the better prepared they will be to meet new guidelines and adapt to NAIC and other regulatory related workflow tweaks. Insurers need to invest in technology that will allow them to see versioned reports and updates in advance of quarter or year-ends so they can respond to changes proactively and avoid surprises.Intelligent asset classification: Advanced technology can provide initial asset classification based on built-in logic, allowing for easier review and sign-off, and thus reducing the workload for insurers.Benchmarking against peers: To supplement reporting and boost performance knowledge, insurers should also look to find ways to benchmark against their peers. These kinds of insights can help remove the guesswork over how they are actually performing and uncover any opportunities they might overlook.Proactive compliance management: SaaS solutions can interpret data loaded by insurers and apply sophisticated logic, proactively suggesting initial classification to further streamline the compliance process.

Real-world impact: NAIC 2025 changes

In 2023, the NAIC published a major change to their reports for 2025 (Principal-Based Bond Definition); this required the addition of two new reports (D-1.1 & D-1.2), as replacements for the legacy D-1 report, and updates to 31 quarterly and annual reports. Included were new stat classifications and groupings, and new reporting attributes.

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

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

Continuous innovation ahead

Naturally, regulatory requirements will continue to evolve over time. And with that, insurers are realizing that they need to modernize their operations in order to help them meet regulatory shifts as time goes on. Doing this successfully requires insurers to devote significant resources to try to keep pace with changes each quarter, and thus their businesses have increasingly been looking to take advantage of technology that will streamline the process and automatically handle much of the heavy lifting.

More importantly, given that regulatory and reporting expectations are dynamic and prone to shifting, bolstering proactive previewing will be key in order to ease pain points and stay in line with regulatory requirements.