Knowledge Bank

Case Studies

Psicle has a range of functionality that allows it to be the perfect platform to manage the IFRS 17 modelling process. We have several clients globally running their Technical Provisions models within Psicle, and extending this to meet the requirements of the IFRS17 standard is a logical next step.

We combine our integrations (both incoming and outbound) to other systems, SQL data processing capability and our cashflow and stochastic libraries to provide our clients with an end-to-end modelling solution. We support a fully integrated approach to calculating the fulfilment cashflows, the risk adjustment (using a range of approaches), contractual service margin as well as the PAA approach.

We currently have a couple of clients signed up to model their IFRS17 reserves in Psicle, as well as running several POC’s for firms in the London Market.

Multi-entity insurer (Lloyd’s, UK, Bermuda) (2018 Client)
Psicle has recently been adopted as the Solvency II Technical Provisions and IFRS17 modelling platform by our client, who is are an organisation with a Lloyd’s, UK and Bermudian entity, as well as a Bermudian regulated Group.

The design of our model across both the Technical Provisions and IFRS 17 is such that our client has the flexibility to run their processes at a policy level, as well as a more aggregated level.

The scope of the engagement (excluding any Solvency II work) is initially to work on a fully functioning PAA approach for the Company Market platforms, with the next phase of the engagement due to includes:

Integrating directly with several existing systems to pull in data. This includes the policy and admin systems, underwriting systems and the general ledger. This is largely already in place for the Solvency II model, meaning updating the models quarter on quarter is extremely straight forward, and the chain of custody of data is always protected.

Producing a contract level PAA model that is able to handle the different options that our client is able to take (for example, whether to accrete interest, or amortise acquisition costs, or discount the loss for incurred coverage)

Producing a contact level cashflow model for the liability for incurred claims. As our client has built the SII TP process within Psicle already, we will fully leverage the models already in place to eliminate any duplication of work.

Producing a set of reports that build the financial statements (Balance Sheet and Income Statement) and management information.

We are currently in the build phase of the PAA model which should be complete in May, at which point we will build the full general model capability, as well extend the Solvency II model for their Lloyd’s platform.

Our PAA model includes custom-built data integrations to automate the pull of data for the purposes of reinsurance modelling, which materially differs from the RI data requirements in Solvency II. It also includes a percentile-based stochastic risk adjustment linked directly to the cashflow engine.

Multi-entity insurer (Lloyd’s, EU) (2019 Client)

Psicle has most recently been chosen by a large insurer with a Company platform and several syndicates in the Lloyd’s platform to automate their Solvency II TP and IFRS17 processes.

We will be implementing an industrialised Solvency II TP model in the first half of 2019 for the Lloyd’s syndicates. We’re then very excited to work with our client to extend this model to the Company platform for both Solvency II and IFRS 17 later in the year.

Ongoing POC’s (as of February 2019)
In addition, we are currently running Proof of Concepts for other firms in the London Market. These cover the following:

Modelling both the PAA and General Model for a select number of lines of business.

The PAA supports several simplifications, including the ability to accrete interest and amortise acquisition costs (or expense immediately)

Generates fulfilment cashflows for both the liability for incurred claims (LIC) and liability for remaining coverage (LRC).

Produces a risk adjustment on both a cost of capital and percentile-based approach. As Psicle is a flexible environment where skilled users can build their technical models, we are able to calculate the risk adjustment using different techniques easily within the same model, which produces a means to compare the results for reasonableness.

o Cost-of-Capital: where future reserves are simulated on both an earned and unearned basis, and appropriately correlated (akin to stochastic capital modelling) with a 99.5th VaR being used as the capital metric. This estimated capital is then run-off (using two different run-off patterns) in order to calculate the discounted cost of capital, before being re-allocated back to individual group (again, used different allocation methods).

o Percentile based: where future reserves are simulated on both an earned and unearned basis, and appropriately correlated. Different percentiles are then extracted using a VaR and TVaR metric, before being re-allocated back to individual group.

Calculates the contractual service margin using the output of the fulfilment cashflows, risk adjustment and using certain data items to derive the profit in the unearned exposures.

Generates IFRS17 results at two different time periods in order to produce examples of the reconciliation of accounts for the CSM, as well as calculate financial statements such as the Balance Sheet and Income Statement.