Actuarial Partners can assist in determining:
- Relevant industry benchmarks
- Developing industry surveys to ascertain industry standards and the operator’s position
- Analyzing the reasons for insurers position in the industry
It is vital that an operator captures appropriate information to ensure awareness of trends and understand the profitability of all lines of business and subsets of the business. This information is then used in formulating business and marketing plans focusing on the business subsets which give the most value of the company. Actuarial Partners can assist in the development of efficient management information systems and analyze which variables should be kept in this system.
Actuarial Partners can provide detailed financial modeling which is essential for effective business planning. These models can assess the effects of new market entry on operator profit, or test the effect of differing models on company profitability.
The level and type of retakaful in place can have a large effect on profitability. We can assist in investigating the financial impact when varying an operators current retakaful arrangements and retention levels. This is performed using statistical modeling, and results in a distribution of profits across various scenarios.Standard input and decisions for this analysis would include the following:
- Range of retakaful levels to test by class of business ( separately for surplus and excess of loss)
- Underwriting risks to be included (i.e. focus on major classes of business)
- Aspects to be simulated, including expected number of policies, claim size, claim frequency, risk of business by size of sum assured, claim run-off rates and reserving patterns
- The level of interaction between volatility of investment return and retakaful arrangements
- Classes of business which must be combined due to inadequate claims data information distribution to use for each aspect being simulated
Based on the above decisions and analysis of the operator’s data, simulations are performed using our internal retakaful optimization model, with analysis and recommendations based on these results.
Financial modeling forms our core practice. We can provide appraisal valuation, dynamic solvency testing and financial condition reporting.
Our financial modeling services can also assist in the strategic running of the company, and includes the following services:
Profitability Analysis – company profitability projections, both for the company as a whole under various scenarios as well as business subsets. It is also used to determine the appropriateness of existing, new or proposed products.
Capital Management – capital requirements projections under various scenarios. This can be used in assessing the cost of capital in order to give assurance to participants and maximize the return on capital to the operator.
Asset and Liability Modeling (ALM) – project invested assets and policy liability cash flows using deterministic or stochastic modeling. Projections are performed using different economic scenarios, risk level of assets, new business written and level of capital requirement. They are used to understand and quantify the level of investment risks due to mismatching between assets and liabilities. This analysis can also be used to assess the impact of falling sukuk (Islamic bonds) yields and volatile equity markets on benefits to the participant as well as managing investment risks by product redesign.