Best ESG solution: Moody's Analytics
Finalists: Conning GEMS, Deloitte XSG
Economic scenario generators (ESGs) have been given a fresh lease of life against the background of an unfamiliar economic landscape, with insurers hungry for greater calibration capabilities and internal model-friendly solutions.
Moody's Analytics' ESG solutions are compiled from a suite of stochastic models, software modules and services that enable insurers to undertake a range of risk management activities.
In 2016, the vendor made three significant improvements to its ESG offering, including real world modelling for investment asset liability management and asset management; real world modelling for 1-year VaR and internal models; and market-consistent valuation of insurance liabilities.
Moody's extended the models for many asset classes (equity, credit, inflation, real rates and FX) to include additional flexibility in how they can capture risk-return views. The firm also enhanced its calibration toolkit to provide a convenient mechanism for users to input their own views.
Adapting clients' models and underlying calibrations for internal model approval was another key feature of Moody's offering in 2016. For example, adding non-Gaussian copula options to the ESG and developing a calibration approach to meet a regulator's expectations about the tail-dependence between credit and equity.
On the market-consistent side, Moody's Analytics has been working with a number of clients on negative rate modelling, as insurers transition to new interest rate models or calibration approaches, such as using normal/absolute implied volatilities.