Moody's Analytics: Innovation through integration

Colin Holmes, managing director of insurance solutions at Moody's Analytics, discusses the strategic, regulatory and technology forces impacting the insurance industry – and explains how Moody's Analytics is delivering comprehensive solutions to the challenges

Colin Holmes, managing director of insurance solutions at Moody's AnalyticsWhat demands are you seeing from the insurance industry in 2019?

Insurers' demand for modelling and analytics continues to evolve. The implementation of Solvency II and similar risk-based capital standards has led to the ongoing development of insurers' risk and finance functions, from risk-control and compliance, to being key players in shaping strategy as firms optimise financial performance.

We also have new drivers of change in financial reporting standards, with IFRS 17, IFRS 9 and US GAAP changes impacting processes and fundamentally the measurement of financial performance.

There are two broad themes: first, insurers must effectively address financial and regulatory reporting commitments; second, there is continued and growing demand from insurers for solutions that provide greater risk and finance insight, and ultimately enable better and faster decisions.

What does that mean for the solutions you provide?

Our basic approach is unchanged. We focus on delivering software solutions that incorporate Moody's Analytics capabilities 'in the box', to deliver comprehensive solutions to industry challenges.

These capabilities include a broad range of models and calculations as well as our proprietary content, for example, economic forecasting and scenarios, capital-market assumptions, credit data, and analytics.

As an example, we have brought our significant actuarial firepower to bear on the IFRS 17 challenge by developing the required calculations and building these into our RiskIntegrity IFRS 17 enterprise software solution.

This allows our actuarial expertise to be packaged into the enterprise software required to integrate into firms' financial reporting processes and support smoothly running operations.

The drive for cost-effective solutions also means customers are demanding the best use of technology.

In particular, firms are using the cloud to reduce computation costs by replacing inefficient, fixed infrastructure with on-demand elastic cloud computing.

We have introduced GridLink-as-a-Service (GlaaS), which allows insurers to perform actuarial calculations on the cloud at an unprecedented scale.

Calculations can be performed in a fraction of the time of a conventional setup, and because there are no fixed infrastructure costs, it is extremely cost effective.

This is already proving valuable for some customers with demanding modelling challenges, and with IFRS 17 calculations.

You said you are helping insurers to make better, faster decisions – can you elaborate on that?

To give business decision-makers the insight to make decisions quickly and effectively is how we see our mission at Moody's Analytics.

To enable that often requires us to unite distinct capabilities; it is an area where the breadth of Moody's Analytics expertise is making a real difference to insurers.

Insurers invest in a range of credit assets, including structured assets and private instruments, taking on a range of risks. The insurance contracts and all the firm's other assets create their own risks.

Now, it's not exactly news to say that these asset and liability risks don't occur in isolation, but in practice, the extent to which many firms can model these risks together effectively is limited.

Since bringing actuarial modelling provider GGY Axis into Moody's Analytics, we have been integrating our actuarial modelling capabilities with our broader set of solutions.

For example, in credit analytics and structured products, we are making it possible for our customers to model complex assets, alongside their insurance liabilities.

Coming back to new challenges for insurers, to perform business projections on an accounting basis under the current expected credit loss model or IFRS 9, firms will incorporate 'nested' calculations of future credit losses on that range of credit assets.

By integrating our extensive credit and actuarial capabilities, Moody's Analytics is helping firms meet these challenges and make better decisions.

Finally, a key focus for us is translating these capabilities, for which our customers already know and trust us, into the analytics that deliver business insight.

For example, we are launching Portfolio Insight, which translates the power of our core modelling and content into an accessible, easy-to-use analytics solution for the analysis and optimisation of insurance investment strategy.

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