Knowledge Bank

Case Studies

UK & Bermudan insurer (2017 Client)
Our client moved from a disjointed spreadsheet-based reserving process to a fully integrated Psicle approach. For years, our client had to manually manipulate enormous spreadsheets fed by CSV extracts from source systems. This process was slow, filled with operational risk and extremely expensive.

Our implementation brought three key things to the reserving process:

• Systems Integration – Psicle is integrated with policy admin systems and automates data transformations to feed the reserving model. This drastically reduces the time taken to run the process and the potential for data errors.

 Reserving Capability – Psicle’s reserving library has given our client more flexibility in their choice of reserving methods and parameters, including the level of granularity. Our client is now able to aggregate and disaggregate lines of business and entities prior to reserving at the click of a button.

They are also able to choose from standard methods (such as the Initial Expected Loss Ratio (IELR), Chain Ladder (CL) or Bornhuetter-Ferguson (BF)) and emerging methods we are supporting such as the Generalised BF, Munich CL and our range of Australian methods. These include the Projected Claims Estimate (PCE), Payment Per Claim Finalised (PPCF), PPCF in Operational Time and Payment Per Claim Incurred (PPCI).

In addition to this, Psicle has reserve uncertainty capability, including the Mack method and bootstrapping. We are building a wide suite of tools so that actuaries can automatically view several metrics using a range of best estimate and reserve uncertainty methods as standard. This will allow actuaries and Boards to get a wider understanding of the characteristics of their reserves.

Reserve Industrialisation – Psicle’s wider capabilities allow for full integration of the reserving process with other business-critical processes, namely the Solvency II Technical Provisions and Standard Formula. Our client is now able to run an end-to-end GAAP and SII model within minutes. They can rapidly assess the impact of a change in reserves, TPs, capital and even QRT results by changing various assumptions, for example selecting a different IELR or development pattern.

We are also in the process of integrating the IFRS 17 modelling into the same process, which will result in the industry-leading ability to industrialise traditional reserving, SII TP modelling and IFRS 17 modelling, all within the same platform.

As the modelling requirements of reserving teams increase in the next few years with IFRS17 joining Solvency II, we strongly believe the reserving process should be wider than traditional GAAP or IFRS4 reserving. Our reserving solution can automate all three collectively, which will drastically change the way our clients run their actuarial and financial processes.

Danish Mutual insurer (2017 Client)

Our client had previously performed their reserving in a large number of workbooks. This process was fragile and opaque, with a high level of operational risk. Resource was dedicated to data manipulation and processing; with no time to meaningfully consider the appropriateness of methods or assumptions, or to understand the reserves.

We collaboratively replicated their reserving process in Psicle, an integrated solution, capable of handling the large quantities of data (over a million rows) and multiple lines of business. Their reserving model now sits entirely on one Psicle canvas, including data manipulation and data validation. Interfaces are tight, with future automation of push and pulls intended.

Quarterly updates are available within minutes, with the actuary, by exception, able to use the highly visual interactive mode of the reserving gadget to tweak the assumptions and select different methodologies. The lead actuary’s time is dedicated to applying expert judgement, comparing a library of methods and running a suite of sensitivity tests.

Consequently:
 Actuaries can demonstrate that the methods (or blend of methods) relied upon for each line of business and each year of account are the most appropriate; and

 The potential volatility in the reserves is understood by senior management, enabling more informed challenge and decision making.