A SPECIALIST SOLUTION TO STREAMLINE CORE ACTUARIAL PROCESSES AND REPORTING

CASE STUDY

2 | A SPECIALIST SOLUTION TO STREAMLINE CORE ACTUARIAL PROCESSES AND REPORTING

A SPECIALIST SOLUTION TO STREAMLINE CORE ACTUARIAL PROCESSES AND REPORTING

BACKGROUND

Xchanging were asked to provide actuarial services to an international specialty insurance holding company with insurance company operations, underwriting management companies and operations at Lloyd’s. It has offices in the UK, United States, and Europe, as well as representative offices in the Far East and South America.

THE CHALLENGE

The customer needed support to address two business challenges.

In technical provisions:• Setting aside an appropriate amount

for future claim liabilities in the balance sheet

• Automating the quarterly process of calculating technical provisions for submission to Lloyd’s.

In RARC:• Aligning its RARC (risk-adjusted rate

change) models with pricing models for the underwriters.

THE APPROACH

The Xchanging team provided onshore support at the customer’s office over ten weeks. We quickly got to grips with the current processes then identified and defined technical projects to achieve the desired outcomes. The team worked closely with the customer’s Actuarial team to deliver the projects. For continuity and to enable the customer to be self-sufficient when changes are next needed, we produced clear documentation explaining the new processes.

Members of the Xchanging team took on sophisticated actuarial tasks as individual contributors to deliver the projects and produce actuarial deliverables.

THE TECHNICAL PROVISIONS SOLUTION

We updated the Internal Solvency model for the calculation of technical provision using the data for a specific quarter. The technical provisions process uses data output from the reserving team and makes a series of adjustments to move to the Solvency II compliant technical provisions. We also analysed the technical provisions for movement - both deteriorations and improvements - of reserves over the underwriting years for different classes of business.

We broke down the project into clearly defined stages:

• Data collection and analysis

• Calculating parameters for technical provisions such as discount factors, using the latest yield curves and payment patterns

• Reviewing the validity of the assumptions under current conditions

• Adjusting the reserving data to arrive at the net technical provision, such as prudence, bound but not incepted, binary loadings and discounting

• Calculating net technical provisions under Solvency II from Generally Accepted Accounting Principles (GAAP)-compliant technical provisions

• Automating the steps to distribute the data by currency for calculation of technical provisions.

We presented the results as a Waterfall chart for clear understanding, prepared an audit trail of the model and updated the process document for ongoing use.

A SPECIALIST SOLUTION TO STREAMLINE CORE ACTUARIAL PROCESSES AND REPORTING | 3xchanging.com

THE RARC SOLUTION

“In all these pieces of work, the Xchanging team understood what was required quickly, and documented the work to a high standard, ensuring that it could be handed over easily upon their departure.”

Testimonial from the customer’s Lead Reserving Actuary

THE RARC SOLUTION

RARC is a part of Performance Management Data Return (PMDR), a monthly data submission to Lloyd’s, which helps it monitor both price movements in the market as a whole, and those of a syndicate relative to the market.

The RARC model analyses the change in price of an insurance contract for a variety of reasons, including deductible or attachment points or limits, a change in breadth of cover, a change in exposure volume and a change in exposure quality.

THE BENEFITS

The customer’s actuarial team is enjoying greater flexibility as a result of the enhanced systems and processes. This ultimately means higher productivity and better value.

The customer can contract essential services such as Regulatory Compliance and Reserve Reviews more cost effectively from Xchanging’s onshore and offshore teams, paying a retainer for recurring deliverables rather than requiring a custom service each time.

We worked with the customer to modify the template for calculating risk adjusted rate change (RARC) for Performance Management Data Return (PMDR) submission to integrate it with the pricing template.

We automated the entire process of price calculation using these inputs and feeding back of the results into the RARC model. The new process can potentially be replicated in other lines of business, with only minor changes.

UK CONTACT ANNE PEARSALL HEAD OF INSURANCE POLICY ADMINISTATION SERVICES E: ANNE.PEARSALL@XCHANGING.COM D: +44 (0)203 604 5133

INDIA CONTACT MANOJ KP, SENIOR VICE PRESIDENT, HEAD — INSURANCE INDIA E: MANOJ.KALLANGADPUTHANKALAM@ASIA.XCHANGING.COM D: +91-9008026183

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