Colin Holmes, managing director at Moody's Analytics, discusses how the large-scale computing power of its AXIS actuarial system can help insurers rapidly generate answers for a multitude of challenges
How is Moody's Analytics using technology to improve insurers' risk and capital management processes?
The cloud is transformational in terms of large-scale computation and we are helping our customers to take full advantage. For example, our AXIS actuarial system has a cloud computing capability that enables insurers to burst to thousands of CPUs. This has a number of advantages – calculations can be performed in a fraction of the time of a conventional set-up, and because there are no fixed infrastructure costs, it is extremely cost effective. This has proven valuable for customers with the most demanding modelling challenges and uptake of these capabilities continues to grow. We expect this to continue, with the advent of IFRS 17 and GAAP LDTI – and have recently added cloud-burst capabilities for our scenario generator.
What do you see as the most pressing risks facing insurers?
There are both well-known challenges and risks and others whose prominence is increasing. First, Solvency II and IFRS 17 continue to shine a light on the challenges life insurers are facing in many parts of the world from the combination of existing liabilities and the persistent low-rate environment, and we are working with insurers to provide real-time risk and solvency monitoring as they manage that challenge. Added into the mix is the rapidly growing focus on climate change, with the certainty that it will change the risk landscape. In the last year to 18 months, that climate risk conversation has really moved up the agenda.
We have incorporated the impact of climate change into risk simulations, as our customers increasingly wish to assess the impact of this on their business.
Aside from IFRS 17, what other regulatory and compliance developments is Moody's Analytics focusing on?
The Financial Accounting Standards Board's Long Duration Targeted Improvements (LDTI) standard, which is due to come into effect in the US in 2022, is another main area we are currently working with insurers on. The changes are somewhat similar to IFRS 17, introducing significant changes in recognising the economic value of the business.
We are developing the new actuarial calculations required within AXIS, and have launched a new AXIS module, 'GAAPLink', that helps insurers address the specific challenges of LDTI in several ways, including through streamlined batch processing and reporting, and improved run time governance, control, and efficiency. In addition, we are working with insurers' accounting teams to understand and help them to implement their target processes – watch this space for future developments from us on this!
