The Benefits of an Independent Accounting Book of Record (ABOR)

It’s not the first and it won’t be the last time we find ourselves talking about the benefits of an independent accounting book of record (ABOR).

Over the last several years, we’ve seen organizations across different industries find challenges with custodian ABOR services. We noted some of these challenges in a 2020 article, from the one-size fits all approach that doesn’t actually fit all, to the time spent manually working with the data and reports you do receive – and whilst many still suffer with the same challenges, we now have the additions of diversifying asset classes, diversifying risk and more. Stay with me…

Insurers Finding Limitations with Custodian ABOR

Insurance companies have relied on their custody banks to provide ABOR services for years. However, recently, changes in how insurers invest, and increasingly sophisticated needs for accounting and reporting has caused an industry shift toward seeking out a specialised ABOR solution.

Whilst custodians are focusing on the safekeeping of assets, which is what they do best, their ABOR offering is falling behind – as a result, it hasn’t changed much over the years. Meanwhile, insurance investing has.

1. Alternative Assets – insurers have increased allocation to alternative assets, putting new requirements on their investment accounting. The traditional custodian ABOR offering doesn’t support private assets and makes it difficult for insurers to add new asset types to their portfolios, without also adding manual work or using multiple systems to account for all their assets.
2. Diversifying and reducing risk – many insurers now choose to work with multiple custodians, particularly in the light of new banking sector challenges such as those we witnessed earlier this year.
3. Embracing regulatory change – the ever-changing landscape of accounting and regulatory requirements, including IFRS, local GAAPs, Solvency II and Lloyd’s, shows no signs of slowing down.
4. Intramonth reporting – Insurers have also found receiving accounting data on a monthly or quarterly basis from the custodian bank leaves gaps for intramonth reporting and makes it difficult to get the information needed for downstream systems and reporting in a timely manner. For example, you may have to wait until business day eight to receive data needed for performance and risk analysis from your custodian. And that data is only provided on a monthly basis, creating limitations for timely analysis. With a specialized ABOR solution, like Clearwater, that data is at your fingertips six days sooner and updated throughout the month, not just once.

New Alternatives for ABOR

Just because a service is available, it doesn’t mean it’s the right one. Insurers have more options now for an independent, consolidated ABOR solution separate from custody that combines private and public assets, and data from multiple custodians in one location.

This independence provides numerous benefits including:

• Automated investment data aggregation and reconciliation across assets
• Flexibility to easily add new asset classes, custodians, and managers
• Consolidated solution to avoid managing disparate systems and manual workarounds
• Daily, validated accounting data to feed downstream systems and provide timely reporting to the front office

With more options available for ABOR services, it’s time to take a closer look at the benefits of a new, specialised solution – that gives you back the freedom to focus on your core competencies. Schedule a meeting with a Clearwater solutions expert to learn why Clearwater could be the solution for you.