Daily solvency monitoring

Daily solvency monitoring


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Speaker(s): Michael Leitschkis, Russell Ward (Milliman)

Insurers have made significant investments into their capital modelling capabilities in order to comply with the Solvency II requirements. Yet for a compliance exercise, this would be a very expensive one. In order to genuinely benefit from their Solvency II models, insurers must leverage their investments to produce actionable management information.

Traditional actuarial reporting processes often involve multiple models sometimes on different platforms with many manual processes to prepare, produce and adjust the results. Yet, in the event of say a market crash, the board needs genuinely timely information such as:

  • What is our revised available and required capital position (possibly on multiple bases) and thus our solvency coverage level?
  • Are our risk mitigation techniques working as expected?
  • What is our solvency position if markets follow scenario A or scenario B from here? To be clear, today's position is needed today, not several days or even weeks later. To address this need, we have implemented a market-leading Daily Solvency Monitoring (DSM) solution combining cloud computing technology with fast and efficient capital modelling powered by the Least Squares Monte Carlo (LSMC) approach.

Content of the session:

  • Describe the enabling methodologies - on-the-fly generation of appropriate capital market scenario data ("ESG Rebasing") and LSMC proxy modelling including the challenges posed by low interest rates
  • Explain how these methodologies are brought together to deliver an automated end-to-end process enabling results to be readily updated to reflect market movements 
  • Outline the roles and collaboration of actuaries, asset managers, IT specialists and risk managers as a key success factor.

The presentation concludes by sharing the speaker´s views on future DSM developments and future use cases of this exciting technology.

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