The Model

Our clients can benefit from our industry-leading Model, a sophisticated user-friendly program built on advanced actuarial and statistical algorithms. The Model utilizes state-of-the-art simulation techniques and a powerful relational database to assist in all aspects of the underwriting process.

The Model takes the user through all stages of the underwriting process, from submission tracking to pricing recommendations to monitoring actual loss experience and profitability of the account after it has been bound. The fact that all casualty contracts written under the auspices of the Model are priced, reserved and stored in the same format allows consistent and effective management of the entire portfolio. This provides the ability to analyze the accuracy of pricing assumptions and to evaluate reserves on a current basis. It also allows the user to match assets to liabilities and to analyze profitability by segment, line or underwriter.

The Model is a comprehensive reinsurance pricing and risk management system for property-casualty reinsurance companies. The system allows a reinsurance company to monitor the risk profile of their existing portfolio, forecast cash flow, and optimize cash reserving and investment strategy. The system's analytical engine is based on proprietary Monte Carlo modeling techniques and Bayesian statistical models.

The system allows reinsurance company analysts to perform the following tasks:

• Enter and maintain submission information in a company-wide database
• Perform flexible and consistent pricing of contracts based on submission information
• Accumulate loss experience from existing accounts
• Monitor and visualize loss development in existing accounts
• Create projections (forecasts) of the loss development process and cash flows
• Compare new information with projections and to revise projections as time progresses
• Perform company-wide reserving and asset-liability matching

The Model employs contemporary actuarial science concepts and combines with them advanced software application design features. Among them:

• Fast Multi-variable Frequency/Severity Simulation Algorithms
• Quadratic Optimization
• Discrete Bayesian Analysis
• Object-oriented Database Design
• Flexible Object-Oriented Modular Structure
• Interactive Visual Analysis

The Model was designed to price/reserve treaties (policies) with highly non-linear conditions, such as Specific and Aggregate Limits, Dividends or Commutations. That requirement posed problems for conventional analytics, no matter how sophisticated they were. Thus, Model employs Monte Carlo Simulations. The simulations framework serves as a foundation for numerous unique features of the Model:

• the Model offers a high level of customization, specifically, the ability to define new lines of business and to employ proprietary models
• the Model saves statistical assumptions used for pricing for future reuse in reserving
• Using Bayesian Analysis Model updates statistical distributions as new evaluations of data become available
• Integrated pricing/reserving design allows the Model to price Loss Portfolio Transfers and Stop Loss treaties
• The ability to price/reserve highly non-linear contracts allows the Model to analyze single policies as well as portfolios
• Simulating the Loss Distribution for every policy, the Model is capable of generating a company-wide Aggregate Loss Distribution and of estimating necessary Bulk Reserves
• Simulations allows the Model to produce not only final Ultimate loss estimates, but to predict payout for any given point in time, which supports proper Discounting of Reserves and IRR calculations
• Proper discounting provides a solid basis for Profitability calculations for every single contract as well as any market segment or any other subset of the full portfolio

The Object-oriented Database design featured in the Model guarantees

• High Data Integrity
• Effortless Renewal processing
• Consistent Versioning and Audit Trail

The application's modular design allows for fast modifications, improvements and customization of the software to meet a customer's demands as well as reflect the changing nature of the Insurance/Reinsurance business.

In short, the Model is a must have tool for any company with a significant portfolio of long-tail LOBs.