Enterprise Risk Management Technology Guide :: Willis Towers Watson: Cloud technology takes centre stage

Willis Towers Watson: Cloud technology takes centre stage

Rob Collinson, global product lead for P&C financial modelling at Willis Towers Watson, explains why insurers increasingly recognise the advantages of cloud technology. He also examines the outlook for capital and risk modelling

Rob CollinsonWhat technology trends do you expect to shape capital and risk modelling in the insurance sector over the next two years?

Cloud technology is at last beginning to be embraced by insurers who understand its undoubted advantages: reducing complexity, costs and risk and improving flexibility. I fully expect the cloud to become a mainstream technology platform for modelling over the next couple of years.

Meanwhile, with model runtimes reduced to a small number of minutes on platforms such as Igloo, attention has turned to the processes leading up to and following on from model runs.

Businesses are also recognising the advantages that can be achieved through automation.

Finally, in all but the most specialist cases, there appears to be a strong trend away from bespoke models being built and maintained by in-house modelling teams. We see firms looking to make use of standard highly flexible vendor models, delegating updates and maintenance whilst giving internal modellers the opportunity to gain deeper insights.

Do you expect insurance risk modelling to change significantly in future?

I built my first capital model about 20 years ago and it is interesting to note every model I see in the market looks really similar to that first model, even now.

Innovation in capital modelling design has stalled as we swim against a rising tide of regulatory reporting. Regulatory model change requirements are a significant source of innovative friction, particularly through the model change processes.

However, all is not lost. Technology and mathematical techniques have improved beyond recognition from those early days of modelling, and even regulation will not hold the potential benefits back for more than the short term.

Post-Covid-19, how will insurance capital and risk modelling change?

The immediate impact of the pandemic led to an asset shock imposing a real risk to insurer solvency ratios. Insurers immediately had to think about running their models frequently enough to stay ahead of this and understand their current position. Firms seemed to handle this pretty well.

The challenge has shifted to how quickly the industry can recognise and deal with the unprecedented increase in general uncertainty. The Covid-19 pandemic was not like a normal shock. It has forced companies to adopt a new business plan in the middle of the year, with no notice, as the market became more volatile and business volumes dropped.

Going forward, there also needs to be recognition by the sector about what risks were missed. I'm not aware of any models, for example, that adequately captured systemic shock.

I think the pandemic has also exposed deeper dependencies and deeper correlations in businesses that are completely unrepresented in most insurance risk models. It is time to have another think about those missing dependencies.

What are the key regulatory areas of focus for Willis Towers Watson's clients?

Solvency II remains a key focus for our clients even though we are out of the first cycle of implementation. Firms are now thinking whether their models are giving them what they need – compliance is necessary, but not sufficient.

IFRS 17 is also at the front of our minds. We are very keen to make sure our clients benefit from the lessons learned from Solvency II and this is reflected in Willis Towers Watson's ResQ Financial Reporter, our key IFRS 17 tool for P&C business. This is designed to provide a complete end-to-end solution for businesses.

What enhancements does Willis Towers Watson plan for its capital and risk modelling products?

Last year was our "year of speed" and we released Igloo 6. The next thing for us is moving towards real-time modelling.

Over the next year, we will be bringing out the Igloo cloud. Igloo cloud will provide a whole new level of flexibility and scalability whilst greatly reducing the need for local IT support.

Igloo will also be the next product in the Willis Towers Watson infrastructure to be linked to Unify, our workflow orchestration and automation system.

Robert Collinson
[email protected]
+44 1737 274145