Modelling team of the year: Swiss Re
Elegant modelling of risk is pivotal to an insurer's success, but accurately judging the interdependencies between disparate and complex risks may help place its risk modellers at their trade's cutting edge.
Swiss Re has a reputation for researching, and for speaking publicly, on risks including by its regular Sigma reports and Swiss Re Institute.
Internally, those involved with its risk reporting capabilities realised recently it was "increasingly hard to manage the complexity" of risks, in its internal capital adequacy model (Icam), which is one of the core models in its Matlab solution.
Various interdependencies between risks made it difficult to fully understand how the model worked, Swiss Re said. To address this and also to help make Icam easier to update, understand and maintain, they completed a "major overhaul" of it last year.
Icam helps modellers understand the combined effect of about 300,000 risk factors on their companies' balance sheets. Across two environments responsible for developing and maintaining Icam, almost 300 workers are occupied. Swiss Re is now working with MathWorks, a maths software developer, to increase the scale and flexibility of Iramp further, by migrating it to an external cloud-based system.
The modelling team also expresses pride in the group's internal model, "fully integrated into our risk appetite and steering framework," and guiding capital and capacity planning, the Orsa, and limits for risk-adjusted costing.
The model's analytics capabilities, full workflow and audit trails, a central data directory and a data validation framework allow various parts of the group to benefit from it, and to generate service reports for functions beyond risk management.
The risk team notes the model "follows a very clear structure and implementation architecture separating risk factors from exposure - hence allowing [users] to better capture dependencies between risk factors. This and our sophisticated balance sheet model, capable to reflect all legal entity balance sheets and intra-group transactions and relationships, are to our knowledge a key differentiator from our peers."