Case Studies

In-house actuarial function at approved start-up Lloyd’s managing agent

We have been the in-house actuarial function for a start-up managing agency since early 2014 supporting the managing agency in all actuarial areas in their successful entrance into the Lloyd’s market, with the new syndicate approved to begin writing business in early 2015. We have continued to support the start-up agency post go-live.

The core actuarial work for the SBF, capital model, reserving, pricing and documentation are outlined below.

(1) Syndicate Business Forecast (SBF):

We carried out a detailed reserving exercise on industry data and used other relevant data available to both challenge and support loss ratio proposals in the SBF. This process involved in depth conversations with underwriting management to gain an understanding of the business, tangible qualitative differentiators and quantitative evidence to support optimistic views against the benchmarks and challenge where appropriate to pitch the loss ratios in the business plan at an appropriate level. We contributed our actuarial opinion in the documentation of the New Entrants Assessment Group (NEAG) submission, a key document in the Lloyd’s approval process.

(2) Capital:

In our Psicle application, we developed a robust, fit-for-purpose capital model to calculate both the to-ultimate and one-year SCR. The model is designed, built and parameterised to fully stochastically model underwriting risk, reserve risk, market risk, credit risk, operational risk and conduct risk with appropriate dependency structures. The model is currently moving in to the “use” phase, and has been a significant contributor to setting risk appetites and for reinsurance purchase. We are also part of regular and ongoing discussions with Lloyd’s in negotiations around the capital.

(3) Pricing & Reserving
We are setting up and calibrating pricing models and establishing a reserving process for when the syndicate starts writing business. When the syndicate begins writing, we will be undertaking formal reserve reviews and reporting back to the relevant committees, and where appropriate assist in the pricing of risks.

(4) Documentation
We have been producing Solvency II and Lloyd’s required documentation, including the relevant evidence templates, Lloyd’s Minimum Standards, policies and internal model parameterisation, methodology and validation reports.