InsuranceERM Annual Awards 2023 - UK & Europe

Transform your reserving processes

Adrian Ericsson, group managing director and co-founder of Dynamo Analytics, and its UK managing director Shil Patel-Rae, explain how the firm can make insurers' reserving processes fit for the future

What is Dynamo's perspective on the key reserving challenges faced by insurers?

Adrian EricssonAdrian Ericsson: Of course, there are today's key issues, such as Covid or inflation. However, for our clients it's about preparing their reserving function to be resilient into the future, and this is something that we spend a lot of time thinking about. There are a broad range of critical issues, such as the transformation of the end-to-end approach to reserving, and bringing new methodologies into the process. This needs to be supplemented with the cultural change needed around the organisation to facilitate this, including the relationship between the reserving team, the chief actuary, and the board. Having technology to support this future state is crucial.

Shil Patel-Rae: We repeatedly see reserving processes that lack flexibility or have a lot of inherent technical debt and are usually a long way from being a production-grade approach for a business-critical process. We've helped insurers turn these legacy processes into an automated end-to-end production-grade process. This changes the focus to using and reviewing appropriate techniques, rather than on just managing to get through the process within the timeline. This has made insurers more able to deal with the immediate challenges, of say the inflation spike, as well as be a core part of the modern reserving process.

How does Dynamo differentiate itself with Psicle, and how will this benefit insurers?

Adrian Ericsson: We built Psicle as the platform to run the reserving process of tomorrow, leveraging our thinking about the future of business-critical processes, and how teams will operate. We've brought our philosophy of "diagnostic based modelling" into the reserving sphere, and implemented "diagnostic based reserving" processes. This makes these processes far more targeted, streamlined, and robust. We're also thinking hard about bringing together human judgement and machine learning, in a way that makes real sense. This will be another core tenet of the Psicle platform.

Shil Patel-RaeShil Patel-Rae: Across many of our clients, one of the common aspects is the target scope of the automated reserving process is too narrow. It focuses too much on the actual actuarial algorithm and not nearly enough on the data extraction and manipulation, the governance and workflows, the collaboration, or on the reporting and engagement.

In building Psicle, we've recognised this and created all the functionality to apply this to broad end-to-end processes, weaving crucial analyses such as data reconciliations, AvE's, AoC's, and dashboarding into the "press of a button" reserving process that Psicle is known for. It also means we are the natural solution for clients looking to tightly couple their GAAP, Solvency II, and IFRS 17 calculations to the rest of the process, which reduces risk and frictional costs.

How can insurers futureproof their reserving processes, and how will Psicle evolve?

Adrian Ericsson: Choose wisely. An advisory partner who is dynamic, nimble and opinionated will give you invaluable challenge in stress testing and sense checking your transformation journey. Your technology platform must anticipate a future reserving state that is consistent with your view.

The impact of machine learning techniques on traditional aspects of our work will also be key; how to best combine our actuarial judgement with artificially produced judgement. Our thinking on this is bringing up some interesting patterns on how to bring teams of humans and "robots" together. Insurers who start answering these questions today will be at the forefront of reserving, and indeed all other, processes in future.

Shil Patel-Rae: We're a business that is futuristic, in that we're trying to anticipate where the world will be in future and building tools to meet that. We're both a technical consulting practice and software provider, and we understand deeply the problems that our clients are facing and can constantly augment our technology to support them. Our Psicle roadmap is ambitious and rapidly evolving, and it is highly rewarding working for a business that is disruptive and setting the standards for the future.