Moody's Analytics, ESG Solutions

Best ESG (economic scenario generator) solution: Moody's Analytics, ESG Solutions

Against the background of an unusual economic landscape, economic scenario generators (ESGs) have become even more integral to the risk management process, with insurers hungry for greater calibration capabilities and internal model-friendly solutions.

In 2017, Moody's Analytics focused on extending its models, including significant upgrades to its nominal rates, equity, credit, inflation, real rates and FX modelling. It also updated calibration capabilities to include additional flexibility in terms of capturing risk-return views.

The firm launched its Portfolio Risk Analytics module, which is offered on a software-as-a-service basis using Microsoft's Azure cloud technology. An API was also added so users can run the tool as part of wider end-to-end automated process, for example feeding in data and passing the economic scenarios to downstream ALM systems.

Moody's Analytics also added a new capability to its ESG called 'Processors', which allows users to build custom models, scripting capability, and post-processing steps within the controlled environment of the ESG software.

The company has been working for the past two years on upgrades to its 'Best Views' real-world calibration services, which has seen it accelerate delivery times from 15 days to 2 days, plus extensions to asset coverage and a roll-out of more flexible models.

In the first quarter of 2017, Moody's Analytics achieved a milestone with the roll-out of its dual term premium credit model, which means it can now offer models that provide high quality fits to calibration targets over one-year and long-term horizons. The one-year distributions have helped a number of insurers attain Solvency II internal model approval.