Andrew Blackburn and Neil Collins, directors at RNA Analytics, talk about honing the next generation of technology for the insurance industry
How have regulations been driving technological change in the market?
Neil: In general regulations are becoming more complex. Model complexity is increased and insurers now require data from many different sources in a secure and timely manner, which increases the complexity of processes – all of this is something that technology needs to respond to.
Andrew: The industry has complied with Solvency II, which allowed the use of approximation techniques to reduce calculation time, but now companies are looking away from these approximations as they can reduce the accuracy of the final reported results. Therefore we see a demand for much more granularity with improved accuracy and enhanced look-through. With focus now shifting to IFRS 17 the regulations require moving from line-by-line calculations to much more complex asset-liability management (ALM) calculations that some regions have not undertaken before. But also there is the need to identify and group policies early on in the process, again increasing the pressure on software, hardware and time.
To react to this time demand on hardware, companies are looking at their grid and cloud options to get access to more processing power in an efficient manner. So the ability to access the cloud for short bursts at high demand times in a simple way is critical.
How are you helping to address the IFRS 17 challenge?
Andrew: In Europe there are different levels of readiness for IFRS 17, a lot of companies have started to create steering groups to assess the requirements and their impact on the business. One approach is to see what can be leveraged from Solvency II and then layer on top some IFRS functionality. The hope is it won't require the same amount of work as Solvency II but ultimately companies are at the start of the project.
For those regions not familiar to principles-based regulation there is a large amount of work to identify and complete and so the workload is even more increased. For example, in some markets across Asia where ALM models are not commonplace and Solvency II-like regulation doesn't exist then companies are having to take the extra step of putting more complex actuarial models in from the ground up.
RNA Analytics R3S software suite has the functionality to allow companies to fully comply with IFRS 17 right now, whether it is layering on top of existing calculations or having to create everything new. The software can process large data sets from many sources, project forward asset and liability cashflows, allow for dynamic decision rules at multiple levels, identify groups of records based on certain criteria and reuse calculations and models for multiple requirements. We have created an end-to-end example of how IFRS 17 could work in R3S, as part of the Standard Code offering, to demonstrate the functionality.
How will the acquisition of Algo Financial Modeler from IBM change the business?
Andrew: The first change is the software is being rebranded as RNA Analytics R3S so our clients have a new name to get used to. Our software is for a niche market and this move allows us to concentrate fully on the service and software innovation required to provide our customers with market leading software for the actuarial and risk management functions. Moving to a smaller company means we can react quicker, work more closely with clients and have much more flexibility to determine the future direction with regards to development and initiatives than before.
What new software initiatives are you working on?
Neil: There are two main developments in the pipeline. There is a new component of the R3S suite soon to be released which enables multiple users to develop models at the same time. It allows users to work on the models library of components in a sandbox environment and then auto merge changes back into the master workspace complemented by an audit trail to report what has been changed. There are also further improvements to the R3S Process Manager component to allow more of the clients' processes to be automated in the future.
Andrew: We have finalised and released our US Standard Code library and so will be exploring opportunities to work with new clients in the US where the requirement for a more principles based approach is now needed, but in the short term then IFRS 17 is definitely where our focus will be.