A fresh
pair of eyes
Case studies
The background
Our client had been writing UK motor insurance business for three years and had grown significantly in that time.
They recognised that their limited historical claims data made it harder to assess the adequacy of their reserves, and asked us to perform an independent reserve review.
The period since the business was set up also coincided with a period of major change in the UK motor market, including softening rates, changes in claimant lawyer behaviour and increasing reinsurance costs driven by concerns over periodic payment orders (PPOs).
The firm had also made changes to claims handling processes over this period, which affected the stability of the observed claims development.
Our solution
We developed a reserving framework that included:
- The use of standard reserving methodologies where possible and bespoke methodologies where necessary, including methods for dealing with the lack of data and distortions within the data
- Methods to allow for emerging trends, including a process for assigning credibility to different possible views on the likely future development of trends
- Incorporation of industry benchmark data and sense-checking of results against our wider experience and against quoted reinsurance costs
- A system of graphical communication of assumptions, methodologies and results to enable our client, its auditors and the regulator to easily understand and challenge our approach
The results
Our client was able to sense check their views on the strength of the business and reach a better-informed view on their appetite for continued growth.
They were also able to improve their internal reserving processes, providing a more effective “early warning” system for management.
How we can help
Your capital model can be a powerful tool for understanding your risk profile and making better business decisions, in addition to calculating regulatory capital.
Insurance regulation has become tougher and more sophisticated. We can help you meet regulatory requirements in a way that adds value to the business.
Data has always been the lifeblood of insurance. The recent explosion in the volume of data available to insurers provides great opportunities but will also generate more intense competition.
Reserving adequacy is crucial to succeeding in the insurance market. But some of the biggest risks to your reserves are not reflected in the historical claims data.
Risk management is at the core of the insurance business. We can help you strengthen the links between strategy and risk management, increasing your chances of business success.
Our independent validation advice helps you to use your models with greater confidence and to meet regulatory requirements efficiently.
