Bermudian insurers target efficient and scalable risk modelling

Published in: Risk, Risk management, Risk Models, Capital Models, Reinsurance, US - Canada - Bermuda, Software - IT

Companies: Aon

Bermuda’s dynamic re/insurance market is looking for quick, efficient and scalable risk modelling solutions, according to Dean Roberts, business development executive for Aon’s analytics and modelling tools.

“Reinsurers are looking for efficient and robust ways to price deals that are coming in, and monitor their portfolios,” he told InsuranceERM ahead of the Insurance Risk & Capital Bermuda event, taking place on the island on 29 October.

“People moving away from hand-cranked processes to solutions that are more industrial. We are able to join different processes together to produce a workflow, with full audit trails,” he added.

Modelling speed is also becoming important, as re/insurers seek to gain better insights by running bigger models with more simulations, more frequently.

Speed can be achieved in two ways – by accessing more computing power or by designing models that run faster. Roberts said Aon’s ReMetrica system now includes a facility to “burst” into a cloud computing environment, enabling users to tap into massive processing power as and when they need it.

Model design is also being addressed. “We’re now launching Generation 3 components for ReMetrica that run up to 30 times faster in some situations,” he added.

Bermuda has been home to major growth in the insurance-linked securities (ILS) markets. Many ILS fund managers start small and focus on specific areas, and can survive with simple modelling on spreadsheets.

But as they get bigger, they need more sophisticated solutions. Aon’s Portfolio Accumulation for Control & Evaluation (PACE) system allows reinsurers and ILS fund managers to model catastrophe accumulation and quickly understand the marginal impact of new deals.

Roberts added PACE allows users “to report back confidently and consistently to investors on the diversification of the portfolio” – an important criteria for many ILS investors.

Life re/insurance has been another growth area for Bermuda, and Aon has provided its ReMetrica for Life Health and Pensions to allow companies entering the market to quickly build models to understand the business and make decisions.

“We worked with one company that bought an annuity book and needed help understanding the technical provisions. The existing book didn’t have any infrastructure in place to do valuations, but we were able to build them a valuation model quickly,” said Roberts.

“That enabled them to satisfy regulatory requirements, but also make decisions about risk management, perform scenario testing, and to understand the level of risk in the business. That used an regulator-approved model and was a ‘delivered’ solution, ready to go out of the box.”

Finally, like re/insurers in other parts of the world, Bermudian firms are beginning to think about how the new insurance contracts accounting standard IFRS 17 will affect them

“Not everyone has worked out what it means for them, and we have some solutions in place to help. For example, you can apply an ‘IFRS 17 view’ to your capital model, to help you decide whether the simpler premium allocation approach is suitable for your business.”