New standards challenge the status of actuarial systems

Companies: FIS

Martin Sarjeant, global solutions leader for insurance at FIS, discusses how new regulations, standards and technologies are changing the way insurers think about their actuarial processes. 

What trends are driving the development of actuarial systems?

Firms are beginning to realise that the range of new regulations, solvency regimes and accounting standards they face means governance is no longer optional. Insurers need to use technology to industrialise their risk management processes.

In the US, firms are grappling with principles-based reserving (PBR); and in most of the rest of the world IFRS 17 is coming into force in under three years. Actuarial systems and processes, and their governance, have become significantly more important over the last 10 years. Now, given their central role in accounting, solvency, and valuing and managing the business, they've never been so critical.

Insurers recognise risks in five distinct areas: input/assumption management, development of models, execution of models, results management, and the end-to-end process itself. All of these risks can be managed by using a technology solution, such as the Prophet Data Management Platform, to industrialise data governance, calculations and reporting processes.

IFRS 17 is less than three years away. How are you helping insurers?

Insurers are looking at this new standard and wondering how they are going to manage its calculations. In Asia, this is a particularly strong concern, as IFRS 17 represents a step-change from what some firms are used to. Internationally, insurers are concerned the most about how to manage governance and data under the standard, as well as how to interpret specific areas.

We are helping our clients by releasing IFRS 17 updates to our solution quickly. In 2017, within two months of the standard being published, we issued a release that provided all the main IFRS 17 calculations. Then, at the end of 2017, we added disclosure calculations, support for transition and reporting templates.

We've designed our solutions so that IFRS 17 calculations sit on top of the computations for existing regimes. It is effectively another run of the current model, so that teams can view their firm both from the perspective of their solvency regime and under IFRS 17.  The adoption of our solution has been very strong.

We have added a range of other associated features. Our solution fully covers the variable fee approach, the premium allocation approach and the building block approach, across all lines of business and all regions. Governance and data solutions have also been a focus for us, with significant updates to our Prophet Data Management Platform. We plan further updates to calculations, governance and connectivity as implementation of the new standard continues across the globe.

How are insurers using the cloud for risk management?

Most of the insurers we talk to in Europe either have something already living in the cloud, or plan to put something into the cloud. Most of the larger insurers have already formed cloud strategy boards. Nearly all insurers have moved past the idea that security concerns are a block to using the cloud.

More than 25 customer sites now access our Prophet Managed Cloud Service globally. We have seen greater adoption by the large insurers who tend to have better defined cloud strategies and potentially see the biggest cost savings in moving into the cloud.

All these insurers are realising the benefits of the cloud and are free from the constraints of a fixed datacentre. For multinational firms, it's also logistically easier to roll out and maintain a solution over a geographically dispersed organisation.

For smaller firms, the managed cloud service is a quicker and cheaper alternative to maintaining a solution on an internal IT infrastructure.

Actuarial modelling lends itself to the cloud really well. Most insurers must perform intensive risk modelling calculations at certain times over the course of the year. For big firms, large grids of compute power are often required to crunch the numbers. The cloud provides performance-level flexibility without the cost.