Archive for February, 2017

Internal Model Validation

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With 2017 well underway, insurers are launching the next phase of model development and are starting to prepare for validation season.

At Dynamo Analytics we believe that a well-designed validation process will enable insurers to embed their models in their critical business decisions, as well as satisfying the regulatory requirements. It should be a process targeted at helping your Board and senior management understand and manage model risk and model quality. In order to do this we designed our Model Certification framework, which provides a consistent, robust and proportionate review process across all actuarial models. Over the past four years we have used this framework to not only help insurers demonstrate the suitability of their internal models relative to Solvency II requirements, but also to help them make smarter business decisions.

We offer:

INDEPENDENCE Our independence from the model allows us to more easily and openly identify model limitations and make recommendations.

INSIGHT Our fresh perspective on your model will bring new insight and ideas to help fuel future model development.

COST-EFFECTIVE SOLUTION Model validation is typically cyclical. Using external resources can be more cost-effective and free up internal resources for business critical roles.

EXPERTISE Our team has a diverse range of actuarial and modelling experience. We can provide subject matter expertise and suggest new techniques and improvements.

TECHNOLOGY We have developed our own technical modelling platform, Psicle®, in which we build robust, repeatable, auditable validation tools and side models.

With most London Market insurers now in their third or fourth validation cycle, capital model validation is ready to advance – it’s what athletes call moving from the “associative” phase to the “autonomous” phase. Advancing model validation means:

  • Answering those niggling questions that are concerning the Board;
  • Staying ahead of the curve with the latest actuarial techniques and emerging risk approaches; and
  • Automating validation processes to allow resources to focus on the results.

Our Model Certification framework consists of five high level, overarching statements. Each of these statements are supported by sub-statements, which give more granularity on aspects of the model to be assessed. With the help of a suite of validation tools, we answer each of the validation statements to help us, and you, gain comfort that the model is operating as expected, and is fit-for-purpose.

Dynamo often bases validation team members at our client’s office for periods of time over the validation cycle. This makes the challenge and feedback straight forward and efficient. We can conduct model runs on-site or remotely. We have a strong team of highly motivated consultants and associates across the UK, South Africa and the Nordics, enabling us to be more cost effective than our competitors.

We believe there are five stages to model validation, so whether you want to start with deciding on this year’s scope, or with designing your annual training programme, we can help.

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We offer a flexible suite of validation services:

  • Ranging from high level reviews to full technical validation;
  • Our services can include model runs to take the pressure off you;
  • We can also use our software Psicle® to rapidly design and build tools that suit your model;
  • Our final deliverable can range from high level feedback to a full validation report, which expresses an independent opinion on the SCR.

Over the next few months, insurers will start to plan the 2017 validation exercise, ensuring it fits effectively within business planning, model development and regulatory timeframes. Whatever your validation requirements, we’d be delighted to tailor our services to suit you, so please get in touch to find out more about our 2017 validation offering.