Over 85% of insurers see their capital modelling adding genuine value to their business beyond regulatory compliance.
This report sets out key findings and a clear action plan for board members, model users and capital modelling teams for 2017 and beyond.
We met with 35 UK insurers to understand how they are getting the most value from their capital modelling. We interviewed board members, other users of the modelling results and members of the capital modelling teams, to understand their different perspectives.
We found a wide range of views. However, through this diversity, clear common themes emerged:
- Capital modelling is widely recognised as a valuable tool for running an insurer– examples include a CEO citing the modelling as a central component of business planning, and a CRO of another firm reporting how it has directly and quantifiably increased return on equity for their shareholders.
- There are eight qualities shared by firms realising the most value from their capital modelling – these provide a non-technical view into capital modelling good practice, and enable firms to assess their own modelling capabilities.
There also remain significant challenges, including:
- Firms struggling to meet the above eight qualities – for example, where the capital modelling is not yet responsive to the needs of the business or where firms are still looking to improve the communication of model results.
- The need to improve efficiency – this is particularly a challenge for firms with approved Solvency II internal models, where onerous regulatory burden is a barrier to development.
- Building a consensus on a range of other areas – including how best to use the model, improve business engagement and avoid model results being misinterpreted.
How we can help
We work with insurers to help them better understand and manage the risks they face and their capital requirements.
We help organisations to unlock business value from their Solvency II processes.
We can help you harness your data for competitive advantage, through powerful analytics and deep industry knowledge.
We provide an alternative, external view on the best estimate level of reserves for insurers and also help them understand the key drivers of variability around that best estimate.
We help our insurance clients to develop strong links between their strategy, capital management and risk management processes, improving their chances of business success.
Our business-focused approach to validation can help you be confident that your insurance models are robust, and that you are meeting regulatory requirements.