Moody's Analytics: Innovation through integration

Colin Holmes, managing director at Moody's Analytics, explains how the solutions provider is helping insurers steer through the Covid-19 pandemic and challenging times with its multi-purpose solutions software

Colin HolmesMoody's Analytics helps insurers to make better, faster decisions – how do you do that?

At Moody's Analytics, our great strength is the breadth of capabilities and expertise we make available to our customers. This breadth enables us to address insurers' challenges comprehensively, delivering the results and insight required by actuaries, finance risk and investment teams – and ultimately enabling them to make better, faster decisions. As an example, let's look at the challenges that new accounting standards – IFRS 9 and 17, CECL and LDTI – are posing to insurers.

Firstly, insurers have to deal with significant change to the financial reporting process, which will require new and complex calculations, demanding sophisticated credit expertise and actuarial modelling. There is a need for more tightly-integrated workflows, for example across actuarial and accounting teams. And, in some cases the changes drive increasingly large-scale calculation. We have brought together capabilities across technology, credit and actuarial modelling and accounting to deliver comprehensive, integrated solutions to this set of challenges – most notably through our AXIS actuarial system and RiskIntegrity Suite products.

In addition, the changing standards will significantly alter financial results, and the assumptions about the calculations have a strong bearing on results. To understand the impact of this change – as well as to investigate the sensitivity to assumptions and external circumstances – insurers need the capability to project and test financial outcomes. Again, we are bringing together capabilities in economic forecasting, actuarial and credit modelling, and enterprise software to provide our customers with solutions in this area – helping them making effective and timely decisions. One great example is some work we have ongoing with a US life insurer to use Moody's Analytics economic forecasts for the impact of coronavirus to drive their actuarial projections modelling in the AXIS system, with the process and resulting analysis delivered through RiskIntegrity Insight.

Building on this, it is not exactly news to say that asset and liability risks don't occur in isolation. In practice, however, the extent to which firms view these risks in a genuinely integrated way is often limited. The AXIS actuarial system, which we have integrated with sophisticated modelling of complex, structured assets, provides a leading platform for firms to develop that holistic view of outcomes. And there is more to come – we are excited by ongoing developments, for example we are developing our next generation of market and credit risk simulation capabilities.

What is your approach to delivering these capabilities?

Our basic approach is unchanged. We focus on delivering software solutions that incorporate Moody's Analytics capabilities "in the box," to deliver comprehensive solutions and build long-term partnerships with our customers. In our longest-standing product areas, the AXIS actuarial system and our Scenario Generator, we have many unbroken relationships with customers that stretch well over a decade. We know our customers have options, and see it as our responsibility to earn their business year in and year out.

Through the pandemic, like much of the world, we have not been able to meet our customers in person. I am proud of the way we have adapted to maintain our engagement with the industry – from our flagship Moody's Insurance Summits, which we have transitioned into a series of digital events with some great industry speakers – to the more frequent, smaller-scale engagements we have with customers, to help ensure they are achieving what they need by using our products.

Has demand for actuarial solutions slowed, have the challenges changed?

No, if anything we only see increasing demand as insurers deal with an increasingly complex set of challenges. One particular area where we see this growing demand is in the scale of the calculations our customers have to perform.

To address this, the trend towards cloud computing is accelerating as firms are increasingly seeking to manage increasing calculations whilst managing reporting timescales! As many of our customers are aware, we have introduced GridLink-as-a-Service (GLaaS) as part of our AXIS solution, allowing insurers to perform actuarial calculations on the cloud at an unprecedented scale. We can burst to thousands of CPUs, 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, including IFRS 17 calculations.

So, whilst the current situation is challenging for us all, in very many ways, we are doing some great work with our customers and are excited about the future ahead.

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