Enterprise Risk Management Technology Guide 2019 :: Moody’s Analytics: Uniting capabilities for innovation

Moody’s Analytics: Uniting capabilities for innovation

Moody’s Analytics continues to experience great demand for IFRS 17 solutions and decision-making tools. Colin Holmes, managing director of insurance solutions at Moody’s Analytics, explains

Moody’s Analytics helps insurers to make better, faster decisions – can you elaborate on that?

Colin HolmesGiving business decision-makers the insight to make decisions quickly and effectively is how we see our mission at Moody’s Analytics. To enable that often requires the combination of a range of capabilities - so, with the breadth of expertise we have at Moody’s Analytics, this is an area where we are making a real difference to insurers.

For example, insurers invest in a range of credit assets, including structured assets and private instruments, taking on a range of risks. And of course, the insurance contracts and all the firm’s other assets create their own risks.

Now, it’s not exactly news to say that these asset and liability risks don’t occur in isolation. But in practice, the extent to which firms are able to model these risks together effectively is often limited.

Since bringing actuarial modelling provider GGY Axis into Moody’s Analytics, we have been integrating our actuarial modelling capabilities with broader expertise, for example, in credit and structured product analytics. By doing so, we are making it possible for our customers to model complex assets alongside their insurance liabilities, and by doing so, gain a better overall understanding of their business risks.

Thinking about specific challenges for insurers, to perform projections on an accounting basis, under CECL or IFRS 9, firms must incorporate ‘nested’ calculations of future credit losses on that range of credit assets. By integrating our extensive credit and actuarial capabilities, Moody’s Analytics is helping firms meet these challenges.

Additionally, a key focus for us is translating these capabilities into analysis that delivers business insight.

The quality of the models and data that generate results are absolutely fundamental – however, models alone are not enough.

Firms also require packaged, accessible software that delivers the insight they need to make decisions.

We recently acquired RiskFirst, whose pensions-analytics software PFaroe® epitomises this, translating a set of core modelling capabilities into accessible, easy-to-use analytics that allows decision-makers to understand the impact of management decisions – ultimately supporting better, faster decisions.

What does that mean for the solutions you provide?

Our basic approach is unchanged. We focus on delivering software solutions that incorporate Moody’s Analytics capabilities ‘in the box’, to deliver comprehensive solutions to industry challenges. These capabilities include a broad range of models and calculations, as well as our proprietary content, for example economic forecasting and scenarios, capital-market assumptions, credit data, and analytics.

As an example, we have brought our actuarial firepower to bear on the IFRS 17 challenge - developing the required calculations and building these into our RiskIntegrity™ IFRS 17 enterprise software solution.

This allows our actuarial expertise to be packaged into the enterprise software required to integrate into firms’ financial reporting processes and support smoothly running operations.

The drive for cost-effective solutions also means customers are demanding innovative use of technology. In particular, firms are using the cloud to reduce computation costs by replacing inefficient, fixed infrastructure with on-demand elastic cloud computing.

We have introduced GridLink-as-a-Service (GlaaS), as part of our AXIS™ solution, allowing insurers to perform actuarial calculations on the cloud at an unprecedented scale.

Has demand for IFRS 17 solutions slowed, have the challenges changed?

We continue to experience a great deal of demand in this area. The anticipated challenges, such as the integration of actuarial and accounting systems, creating data, modelling, and governance challenges, mean the impact of IFRS 17 is now being felt across the industry.

This is particularly the case as insurers are now deploying software and integrating their actuarial and accounting systems, preparing data, running calculations and testing their processes.

We are currently working on projects with a number of customers globally, in preparation for IFRS 17 implementation. We relish the opportunity to help our customers with this significant challenge.

 

Colin Holmes

E: [email protected]