Insurance Consulting – Broader Financial Risk Management

The future is uncertain. For any business, such uncertainty is usually synonymous with risk. Our role is to help clients understand and manage that risk.

The LCP difference
  • We help clients understand the nature of the main risks in their business or in a specific area of their business and the extent to which decisions now can control these risks in the future.
  • We guide clients in setting their risk budget, ie, what proportion of the total risk should be controlled/hedged and what proportion should be accepted. The risk budget will be based on business objectives and the Company's general attitude to risk.
  • We advise clients on how to maximise the expected reward to their business for accepting risks.
Leading simulation models

We have developed computer models that can be used to simulate future outcomes. This is done either on a scenario testing basis, a stochastic basis or both.

Scenario testing is a "what happens if?" analysis with a range of possible futures being analysed by the model.

Stochastic modelling is best described as a "what could happen?" analysis with the computer testing hundreds or thousands of completely random possible futures. This will have a most likely outcome but, more importantly, gives a feel for the possible range of outcomes.

These models can add value to any business, but apply specifically to general insurance companies. We have used these risk management techniques in the past to advise general insurance companies and Lloyd's syndicates on:

  • product pricing;
  • reserving for Incurred But Not Reported (IBNR) claims;
  • testing the effectiveness of a reinsurance program;
  • testing the value for money of a reinsurance program in premium negotiations; and
  • testing the efficiency of an insurance company's investment strategy.

The techniques applied in actuarial analysis can equally be applied in other areas of financial risk management. Our mantra is “if there is a cash flow then we can model it”.

The future is not certain and a single point estimate of the future gives only a small amount of information. We add significant value by assessing the volatility of the future. This allows management to put in place measures to mitigate the financial risks they are facing.

As actuaries, we can assess this financial risk and help to manage it.