OVUM VIEW

Summary

With its Abacus/Solvency II offering, BearingPoint is targeting the regulatory reporting requirements of Solvency II, an area that many insurers underestimate in terms of the complexity and effort required to achieve compliance. BearingPoint has built upon its proven Basel II offering to exploit opportunities presented by the Solvency II regulatory reform that will come into effect across the European insurance industry by the end of 2013.

Abacus/Solvency II currently forms the cornerstone of BearingPoint’s expansion into the European insurance sector and is part of a wider “asset-based consulting” strategy which complements the company’s core management consulting and IT services offering. While the Abacus/Solvency II offering is a strong proposition within the reporting arena, it only addresses one element of Solvency II. BearingPoint will be competing against global vendors with greater technical resources, higher brand profile, and offerings that encompass the entire spectrum of Solvency II requirements.

Exploiting its product base is a key element of BearingPoint’s growth strategy

Since the management buyout of its European operations in 2009, BearingPoint has been steadily re-building the business, taking advantage of its strong European focus, independence, and mix of management consultancy and IT services to return an 8% CAGR over the last three years and achieve revenues of €515m in 2011. In 2010, management also secured the rights to the company name, so BearingPoint now refers only to the European operations.

The insurance sector currently accounts for approximately 10% of BearingPoint’s total revenues and it has approximately 400 staff focused on the sector. The Abacus/Solvency II product is the key element supporting BearingPoint’s expansion into the insurance sector during 2012/13, and reflects the company’s wider asset-based consulting strategy of utilizing its intellectual property and proprietary software as the core of a combined product and services offerings within key verticals.

BearingPoint has a number of internally developed assets, such as its EasyTax, FiMIS, LogEC, and Infonova R6 platforms, which will play increasingly important roles in client engagements. However, BearingPoint needs to ensure that its independent stance is not eroded in the eyes of clients and and it does not become seen as yet another service provider promoting its own products.

In Abacus/Solvency II, BearingPoint is exploiting a proven platform

The reporting requirements of Solvency II present insurers with significant challenges both in the frequency and granularity of information demanded. Much of the reporting is required on a quarterly basis and regulators want the ability to completely “look through” the information, from a top-level dashboard view to source data such as policyholder records. In addition, the exact reporting requirements are still evolving and significant differences exist between national regulators.

Abacus/Solvency II is BearingPoint’s Solvency II data model and reporting engine software, which validates and presents key risk-based capital indicators in the quantitative reporting templates (QRT) format defined by the European Insurance and Occupational Pension Authority (EIOPA).

Launched in November 2011, Abacus/Solvency II is derived from BearingPoint’s existing Abacus/DaVinci platform used to support the reporting requirements of Basel II within the European banking sector. Abacus/DaVinci has been in use for 18 years and has significant market share in Germany, Austria, and Switzerland, with some 150 European banks using it. BearingPoint estimates that 60% of the components of the Abacus/DaVinci platform are being reused on the Abacus/Solvency II platform.

BearingPoint has worked closely with the European Insurance CFO Forum in defining client requirements for Abacus/Solvency II, and a major milestone in building the credibility of the product was the completion of a group-wide implementation at Allianz in March 2012.

Abacus/Solvency II is a strong play but will face stiff competition from larger service providers

Abacus/Solvency II combined with BearingPoint’s services offers a strong proposition for a number of reasons.

• It is based on proven technology and architecture designed to meet a similar requirement (Basel II).
• It offers strong source data validation capabilities with some 2,600 rules that highlight potential information and complex relationship errors. Data quality and validation is a key pain point for many insurers in achieving compliance.
• It provides comprehensive functionality such as implementation of all 63 QRTs and governance features such as authorized sign-off hierarchy, and conforms to national regulatory standards such as those enforced by BaFin in Germany and the Financial Services Authority (FSA) in the UK.
• The BearingPoint maintenance service will implement both overall and regional regulatory requirements as they continue to evolve.
• It is supported by a core team of approximately 100 consultants.
• It has a strong reference client with the Allianz implementation.
• BearingPoint has complementary assets such as the HyperCube solution, which supports risk analytics, and the Mike2.0 information management methodology.

However, BearingPoint will face significant challenges in establishing Abacus/Solvency II as a market leader in this space. While BearingPoint has the skills, it lacks the scale to deliver large numbers of implementations, particularly outside of its core markets of Germany, Austria, Switzerland, and France. BearingPoint is tackling this in a pragmatic way through internal and external expansion. It is utilizing its partner networks to meet demand, but in working with the likes of Tata Consultancy Services (TCS), careful channel management will be required to avoid tricky conflicts of interest.

Solvency II is the European insurance industry’s “Y2K,” with a host of vendors competing in the space, many of which have huge marketing budgets, are deeply embedded within major insurance clients, and have a broad Solvency II offering. BearingPoint lacks the profile compared to global and regional IT service providers such as IBM (particularly following IBM’s recent acquisition of Algorithmics), Accenture, and Capgemini. It will also face tough competition from some specialist providers such as Moody Analytics and Wolters Kluwer.

APPENDIX

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