We bring together experts in insurance, actuarial science, data science and regulation to assist clients in deploying advanced analytics, performing internal model validation and managing the associated risk.
Our dedicated insurance team supports property and casualty, life, and composite insurers in qualitative and quantitative areas, including model validation and governance, balance sheet management, investment optimization, underwriting performance reviews, risk appetite, insurer strategy reviews, key performance indicator reviews, reinsurance purchase optimization, and insurance mergers and acquisitions. We have expertise in regulatory and financial reporting standards, including Solvency II, stress and scenario testing, Bermuda Monetary Authority, IFRS4 and IFRS17.
Having worked with insurers in many different regulatory jurisdictions, we have established robust, comprehensive model governance and validation frameworks that enable clients to meet regulatory requirements while maintaining an efficient, effective validation function. Much of our recent work has focused on helping firms introduce advanced analytics approaches safely, thereby de-risking the latest analytics related to claims management and pricing.
The EU’s Solvency II directive has triggered a major change in how risk is measured and managed. Many insurers now need to develop internal models to calculate accurate capital requirements. To address this challenge, Risk Dynamics helped to develop a partial, internal model at a market-leading domestic insurer whose risk function had limited experience in modelling and validation.
Together with the client, we designed a customized validation framework that included standardized test plans by risk type, work programs, report templates, and recommendation logs. We advised on several risk types and performed the first full validation and several cycles of periodic validations. The client’s domestic regulator approved the model, and thanks to capability-building and knowledge transfer, a small internal team now manages model validation.
As the insurance industry’s use of analytics grows, a holistic framework is needed to manage this emerging model risk. Risk Dynamics supported a global insurer in creating a consistent, group-wide framework to determine the extent of validation and review needed for all 30 strategic models within the firm.
The study included a benchmarking exercise that compared the insurer’s practices to those of its peers and to market best practices. This exercise provided a full view of the insurer’s existing state and allowed us to identify areas of improvement. We combined the results with Risk Dynamics’ model risk management framework to create a tailored, enhanced framework that won buy-in at the management level. Then, through knowledge transfer, we empowered internal staff to lead key aspects of the framework’s implementation.
Pankaj helps senior executives at leading financial institutions around the world solve their most challenging risk analytics problems. He leads McKinsey’s Model Risk Management Service Line in North America
Frédéric serves financial services and public sector organizations around the world on their strategic, risk, digital, and analytics challenges
Tom helps financial service firms manage the risks of their rapidly growing inventories of models and analytics