COMPLIANCE AND FRAUD
Norkom Technologies, Boston, launched
its Norkom Watch List Smart Update, a
new analytic process designed to drive
down false positive rates in the detection of financial crime, resulting in significant cost and time savings for leading financial institutions without
increasing the risks of missing an important match.
The next generation of Norkom’s
innovative List Fingerprinting technology, Norkom Smart Update monitors
every change in information provided in
a watch list update, or even potentially
client data, reducing investigation effort
without sacrificing match quality, the
company says. It also eliminates the
need for a financial institution to build
large exclusion lists, or “whitelists,”
reducing investigator effort and minimizing the threat that a high-risk individual could be removed from the
screening process by accident
CA Inc., Islandia, N. Y.,
and Acxiom Corp.,
Little Rock, Ark., partnered to deliver
enterprise-class, on-demand information
governance solutions, combining CA’s
capabilities with Acxiom’s IT platform.
Together, the companies are positioned to take advantage of a growing
market with their cloud-based, hosted
solution. Worldwide cloud services revenue is on pace to surpass $56.3 billion
in 2009, according to a Gartner Inc.
report. The market is expected to reach
$150.1 billion by 2013.
The solution offers an alternative to
on-premise software deployments, providing a single portal view to better
manage e-mail, archiving, litigation hold,
search, records declaration, retention
and disposition, according to a company
release. Additionally, it enables users to
conduct e-discovery tasks directly from
their desktops without a service-provider intermediary.
Regulatory developments are fundamentally increasing their demand for
decision-support tools that provide
reinsurers an economic capital model
of their enterprise to help them evaluate risk and capital management opportunities.
In Europe, Solvency II and national
requirements, such as those of the
United Kingdom’s Financial Services
Authority, are pushing carriers to establish capital models, which are not
something they can develop overnight.
“It takes three to five years to develop a
DFA model from scratch,” Klein says.
Guy Carpenter’s MetaRisk product is
just one tool that is based on a DFA
model. And while some reinsurers are
using proprietary products from technology providers, others are developing their own capital models to conform to regulations.
Underwriters continue to develop
catastrophe models and peril models,
which assess catastrophic risks on the
property side. And insurance companies, in particular, are developing a
wide range of pricing models that take
into account various underwriting factors to help establish a price or rate for
risk so they can boost profits.
While carriers’ risk management
needs have quickly evolved, so too
have the solutions offered by technology companies. Robbins says the
work of a variety of (undisclosed)
vendors has vastly improved
Transamerica Reinsurance’s ability to
run more scenarios to better understand underlying risks (i.e., what has
increased or decreased Transamerica
“That is something that the software industry has improved pretty
significantly over the past five years,”
Technologies such as EMB North
America’s Igloo, a financial modeling
platform, have also seen widespread
use. Launched in 2001, Igloo is now
used by about 130 insurers and reinsurers, says Tom Hettinger, managing
director of San Diego-based EMB.
Interest for Igloo has not only come
from both the United States and
Europe, but also places such as
“They have that regulatory push on
them and saw a need to manage their
overall aggregate risk, understand the
different drivers of it and start quantifying how they could improve their
risk position,” Hettinger says.
Given the number of risk management technology providers, choosing
the right vendor is but one challenge
for reinsurers. Some insurers and reinsurers may be wowed by a technology
and plow money into it without focusing on the data or its risk management
strategy. But, modeling software is only
as good as the underlining data that is
fed into it.
“Having the right focus and energy
on understanding that data, understanding what is being fed into the
models, and making sure that that is
accurate, that it is controlled and that
you really validated it is incredibly
important, and is something that gets
missed in some of the results I have
seen elsewhere,” says Robbins.
A reinsurer can play out innumerable scenarios with modeling software,
but it needs to know how to effectively use the technology to make important risk-based decisions.
“The capital model is not the
answer to everything,” affirms Klein.
“There still remains a need for human
intervention and for human intuition,
so we are not just underwriting on a
IT departments also need to be wary
of being enamored with sophisticated
risk management technology. Too
often, IT executives fail to get buy-in
from top management for their new
risk management approach.
“It is absolutely necessary for actuaries to be using the DFA tools and
other tools to run these analyses,”
explains Light. “But then the information has to go up the chain of command, and CEO/COO/board members
have to understand and actually set
policies and monitor risk policies
(regarding capital levels) that are based
on those models.”
Risk management tools, such as
Dynamic Portfolio Optimization, are
becoming increasingly popular in the
industry, notes Klein. These tools
enable one to look at a portfolio of
risks and identify the most capital-intensive (or high-cost) risk.
As natural disasters, financial crises
and other market interrupters swirl
around them, reinsurers will not balk
at exploring the ever-more sophisticated and proliferating array of risk
management technology available to
them. Indeed, it is one technological
expense that pundits believe may not
take a hit due to budgetary cutbacks.
“We will continue to invest significant funds in risk management technology,” says Robbins. “It is an important part of our business and what we
do. We are a reinsurer—we are accepting risk. So understanding it better is
something that really benefits us pretty
significantly as an organization.” INN
Daniel Joelson is a freelance business writer
based in Arlington,Va.
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