Strategies and technologies to boost
behind-the scenes efficiencies
to be hit in the near term,” he says.
“Legacy administration systems can
provide problems not just to modelers
but also to the people doing the finan-
cial reporting. It will be the data re-
quests, and the new forms, formats or
level of detail needed to in order to sat-
isfy these new regulatory requirements
[that present challenges].”
As a result, insurers may need to re-
assess how various processes are struc-
tured and the technologies that enable
them. Indeed, there’s an argument to be
made that the principles-based ap-
proach only became feasible as the un-
derlying technology got better.
As insurers need to stress their bal-
ance sheet under different scenarios,
the focus right now is to expand actu-
arial models to better capture the effects
of the ups and downs in the economic
environment, says Van Beach, director
of business development at Seattle-
based Milliman Inc. “Rather than doing
a single scenario, you now work across
a set of 1,000 scenarios,” he says. “You’ll
then use actuarial models to capture
policy-specific behavior under each of
those 1,000 scenarios. Rather than
coming up with a single answer, you’ll
look at ‘what’s the capital level I need to
ensure solvency across 99% of these
scenarios.’”
As they feed ever-larger data sets
into their computational models, ac-
tuaries in particular have benefited
from advances in hardware, grid and
parallel computing in recent years.
For more about the life sector, search “Oppor-
tunities Await” www.insurancenetworking.com.
Emerging Risk Solutions’ Coburn says.
“For example, you can run a stochastic
model on an individual about how
their life may pan out. Then you have
to run that for 100,000 individuals in
a given portfolio. Then you have to ac-
count for the thousands of ways that
mortality might play out. When you
have stochasticity on top of stochastic-
ity, it gets pretty ugly, pretty quickly.”
With computational horsepower at
a premium, Beach says cloud comput-
ing has the potential to shift the way
actuaries conduct their modeling.
“One thousand-scenario projections
have become the bread and butter,” he
says. “Those scenarios are independent
and are easily parallelizable tasks. My
only concern is that these cloud plat-
forms were not developed with com-
putational modeling in mind, they
were developed to handle Web sites.”
No matter what advances happen
on the technological front, Beach ar-
gues against a brute force approach.
“Risk management has become more
of a wisdom issue as opposed to be-
ing able to shove in a lot of parame-
ters into a model and see what comes
out.” INN
