Life insurers face competing challenges — holding sufficient capital to meet long-term liabilities while optimizing returns on capital in the shorter term.
Optimizing capital usage while responding quickly to market opportunities or threats requires understanding and quantifying your risks and capital requirements.
These insights can be provided by RiskAgility EC, a technically robust and flexible framework for modeling your risk and capital requirements.
Our advanced, scalable Monte Carlo simulation engine models millions of permutations of future states of the world, letting you rapidly value assets and liabilities in each possible future state, build loss distributions and assess possible losses at any defined confidence level.
With RiskAgility EC you can
- Clarify your risk management and decision-making by measuring risk capital requirements across all businesses and risks on a consistent and diversified basis
- Improve strategic decision-making with insight on different asset allocations of risks, external stresses and detailed analyses of the capital efficiency and diversification benefits of potential mergers and acquisitions
- Identify the sources of risk and diversification with detailed and accurate capital requirement analyses on an allocated or standalone basis for any lower-level groupings of assets, liabilities and risks
- Understand the impact of reinsurance limits, hedge strategies, asset allocations, acquisitions and divestments
- Investigate asset and liability valuations with three flexible options for revaluations: calibrating to results from existing models, directly inputting results from existing models and interpolating between them, or embedding the valuation models directly within the stochastic simulation engine
- Ensure you don’t waste existing investments in models with flexibility that allows for non-linear balance sheet movements and interaction terms between multiple risks
- Reveal risk in the tails of distributions with separate modules for reinsurance, tax and ownership
- Explore sensitivities and stress tests without needing a model recalibration with customisable What-if? Modules
- Analyze movements in capital requirements between time periods
Better monitor solvency requirements and optimize capital with RiskAgility EC
RiskAgility EC introduces another level of clarity to your solvency requirements and decision-making processes. Spend more time analyzing realistic economic capital modeling insight, rather than producing results.
By making accurate and comprehensive economic modeling quicker and easier, you can also refocus on exploring the added-value analyses the business needs to maximize returns and minimize risk on capital.
While life insurers using correlation matrix aggregation — or variance-covariance – risk models may appreciate this straightforward approach, the simplified assumptions involved could see you miss out on accuracy. Correlation matrix aggregation approaches to economic capital modeling don’t capture real-world dynamics, such as non-linearity and interaction terms.
Relying on the outputs of models with these limitations could lead to incorrect conclusions and suboptimal decision making. Understanding and quantifying the impacts of model limitations can be a significant and time-consuming process. You may have to carry out repeated What-if? analyses and sensitivity testing to make fully informed risk management and strategic decisions.
With RiskAgility EC’s advanced functionality, deeper insight and more refined calculations that consider risk interactions and mitigations, you get near real-time risk analytics. This analysis more fully reflects reality, boosting both your ability to deliver robust and continuous solvency monitoring, as well as the optimized risk management that investors, regulators and stakeholders increasingly expect.
How are life insurers using RiskAgility EC?
The challenge: When two UK insurers considered merging, each needed to model the capital position of the combined business and analyze the diversification benefits before proceeding.
The solution: We created a model of the joint business within RiskAgility EC, allowing for flexible changes in assumptions and structures. The model considered consistent risks affecting both insurers and included stress tests.
The impact: Within one month, RiskAgility EC produced the results the insurers needed to inform a go/no-go decision for the merger, calling on the flexibility and modularity of the RiskAgility EC model.
The challenge: A large European insurer needed to analyze the capital impacts of various asset allocations using its economic capital model. The analysis had to be flexible, fast and accurate to be useful for informed strategic decision making.
The solution: We implemented RiskAgility EC with expanded What-if? scenarios to include asset mixes and risk stresses, converting the scenarios into a format we could import into the RiskAgility EC model and upload using bulk import functionality to minimize manual intervention.
The impact: The insurer was able to produce the required capital results using a highly automated and controlled approach, enabling rapid updates on different strategies.
RiskAgility EC — part of WTW Solutions for Life
Solutions for Life is our comprehensive, integrated portfolio of software tools and consulting services providing actuarial risk reporting solutions to help life insurers save time and money, comply with regulatory demands and optimize legacy systems.
To find out how RiskAgility EC can transform your risk management and capital optimization abilities, speak to our specialist team.
