Power up capital modelling with the cloud
Chris Bird, global proposition leader for P&C capital modelling and ERM at WTW, discusses the benefits cloud technology offers insurers, and how the company plans to develop its Igloo Cloud solution
How can WTW's Igloo Cloud empower insurers?
Igloo Cloud has brought a whole new level of power to capital modelling and risk analytics. These models involve a huge number of calculations and the cloud enables you to parallelise these across a virtual grid of machines, rather than being limited to one.
Large models, that previously may have taken hours, now run in just a few minutes. You can also run multiple models at the same time, rather than having to queue them up to run in succession. This has opened up many new opportunities; we now see our clients doing things with capital models that were not previously possible. Until recently, it was common for a team to queue up a batch of tests to run over the weekend, now they can run together in less than an hour.
The magic of the cloud is its flexibility and scalability. We've seen clients running over 100 model tests in parallel. But you are only paying for the compute power you use. Running a single machine for ten hours costs the same as running ten machines for one hour - same cost but a fraction of the time.
How does WTW expect cloud solutions and automation to change capital modelling?
We're now seeing that firms are doing more and doing new things they couldn't do previously. Some firms have increased the granularity of their models. Others are running more analytics. It has enabled a step change in the value firms can get from their models.
A pertinent example is in assessing reinsurance. Reinsurance rates have shot up recently and many firms have found that their existing programme is unaffordable. Insurers are using Igloo to assess how their reinsurance programme controls their risk profile; not just tail risk and capital, but also by how much their earnings volatility would increase if they raise their retentions. Now with Igloo Cloud, a company can quickly test out a wide range of alternative reinsurance structures, and maybe even going right back to a blank canvas and fundamentally redesigning the structure that works best for them.
What are WTW's plans to further develop Igloo Cloud?
Igloo Cloud provides a super-computer engine behind the Igloo Desktop and Igloo Manager applications. We are now creating a full SaaS version where users will be able to work through a web-browser instead of a desktop application, and therefore don't need a local installation of Igloo.
We are also continuing to develop the user interface, particularly the usability and automation capabilities. Models now run in minutes, but that is of little use if it takes days to get answers to strategy questions because humans are bogged down crunching data, checking inputs and endlessly pressing buttons. We also have a key focus on further building out business applications and reporting as we see increasing demand for companies to use their models in more ways.
How do you expect cloud technology to change in future?
We've seen a big change in sentiment to the cloud over the past few years. Previously, many companies were wary, particularly concerning data security. Now, however, almost every company is on a journey to the cloud, if not already there. Companies see that the cloud offers a far higher level of security than you would have with servers in your own office, as well as related capabilities such as advanced disaster recovery.
As regular upgrades continue to be made to the underlying cloud hardware, each time giving further improvements in run time, the power the cloud offers is only going to get better.