Conning: Opportunities amid the challenges
Increasing challenges for re/insurers also brings opportunities for the sector, according to Dan MacKenzie, software product manager and a managing director at Conning
What are the key modelling issues for actuaries and insurers today?
In terms of challenges, our user community is facing increased regulatory and best practice demands, and on the accounting front there are the upcoming IFRS 17 rules.
On the investment side, there is a continued upward trend for alternative investments, which presents a modelling challenge.
We continue to have a low interest rate environment and that brings its own difficulties for re/insurers.
There is also an uptick in credit risk modelling due to the level of sophistication users are demanding. We expect that trend to continue.
If we look at the opportunities and the ways Conning can be of help, we view the upward trend for investing in alternative assets as an opportunity where our services are well-suited for users interested in incorporating such investments into their model.
Any kind of risk hedging, be it cash-flow matching, duration matching or derivatives matching, are important opportunities too.
On the infrastructure side, we view the ongoing cloud deployment of risk management software as an opportunity for our clients to address some of the challenges on the regulatory reporting front.
What are the new products and services Conning is working on?
From an infrastructure perspective, we are going to continue with the cloud deployment of our software, which started last year.
We now host grid-as-a-service functionality in which the simulation engine can be hosted by Conning and run in the cloud by users.
This year, we are introducing a cloud version of our efficient frontier investment optimisation tool.
Cloud deployment is an ongoing exercise for us as we will be rolling it out over the next few years.
On the integration front, we are looking to enable our users to quickly generate economic scenarios.
And we continue our strategic alliance with FIS, which we began in 2018 to provide clients with enhanced, end-to-end financial modelling solutions combining our GEMS® Economic Scenario Generator and FIS’s Prophet actuarial software. FIS has built an add-on to its Prophet system that runs our software on the fly. These new capabilities enable Prophet clients to solve a wide range of actuarial problems that previously required significant pre-processing and data manipulation.
What are the main emerging risks facing re/insurers?
The emerging risks, which are receiving intense focus, include both new and older concerns.
We view, for example, IFRS 17 and IFRS 9 as both reporting and operational risks. The ability to provide more monitoring and management in shorter timeframes is one of the strengths of our software.
Our software also enables users to run models in a set timeframe, view the analytics and make actionable decisions.
Another risk we are increasingly seeing is longevity risk, particularly in the pensions space. There are increasing demands for pension providers to reflect this risk not just in the valuation of their liabilities, but also in their asset management practices.
Can Conning help insurers prepare for the upcoming Solvency II review?
We expect to help our clients, as we already have, with supporting their reviews of Solvency II reporting, be it internal models or standard formula approaches.
My view is we will see continued emphasis on regulatory reporting and transparency. The information insurers are being asked to produce and manage is only going to increase over time, and the demands on stakeholders they share the information with will likely rise too.
Dan MacKenzie
T: + 49 2217 8800 300