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SAS RISK MANAGEMENT FOR INSURANCE

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Copyr i g ht © 2012, SAS Ins t i tu t e Inc . A l l r ights reser ve d .

PRESSURES FACING

INSURERS IMPACT ON RISK MANAGEMENT

Risk Management Requirements

• Embedding risk function in decision taking processes

• Increasing sustainability of risk adjusted performance

• Optimizing compliance costs

Increasing

compliance

Costs

Volatile Results

Increasing Cost

Pressure

Loss of

Confidence

Necessity

to diversify

Solvency II /

Regulatory

compliance

Market /

underwriting

Risks

Operational

Risks / Legal

Volatile

Capital

Markets Saturated

Markets

Demography

Investors /

Rating

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CHALLENGES

Silo systems and business units Poor business decisions

ISSUE IMPACT

Incomplete data & data inconsistencies Loss of productivity

Incomplete view of risk Insufficient / excess

capital

Limited or non-sophisticated risk tools Regulatory non-

compliance

Unreliable and inaccurate reporting Loss of insight

Limited resources Increased expenses

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VISION STATEMENT SAS RISK MANAGEMENT FOR INSURANCE

• To allow insurance companies to manage risk across the organization in an

integrated fashion.

• Risks are often interlinked and understanding how these links affect the

business is important

• The systems which manage this are not only a part of the regulatory

approach but will also be used to drive business behavior

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SAS RISK MANAGEMENT FOR INSURANCE

Firmwide Risk

MCR and SCR calculations

Reporting Portal

Underwriting Risk - Life

Market risk analysis Insurance risk analysis

Investment mark to valuation Life liability valuation

Underwriting Risk – P&C

Loss reserving

Data Management – Data Quality, Data Models and Flows – Detail Data Store and Data Marts

Solo / Group fund calculation

Operational risk calculation

Default risk capital calculation

Market risk capital calculation

Life insurance risk capital calculation

Health ins. risk capital calculation

P&C insurance risk capital calculation

Market Risk

Copyr i g ht © 2012, SAS Ins t i tu t e Inc . A l l r ights reser ve d .

FIRMWIDE RISK SAS RISK MANAGEMENT FOR INSURANCE

• Calculation of Solvency II quantitative (Pillar 1) requirements – Solvency

Capital Requirement (SCR) and Minimum Capital Requirement (MCR)

• Aggregation of risk capital charges across all risk modules

• Calculates capital and solvency ratio

• Supports counterparty default risk and operational risk calculations

• Calculates reinsurance receivables

Copyr i g ht © 2012, SAS Ins t i tu t e Inc . A l l r ights reser ve d .

MARKET RISK SAS RISK MANAGEMENT FOR INSURANCE

• Supports configuration of financial instruments and assets, including:

• Bonds (fixed, variable, callable, corporate, etc.)

• Equity – spot

• Derivative instruments with underlying equity, currency and bonds

• Credit derivatives

• Swaps (interest rate and currency)

• Options on swaps, caps and floors

• Property

• Supports stress tests based on interest rates, equity, currency rates and

property rates.

• Calculates and aggregates risk capital charges.

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LIFE

UNDERWRITING

RISK

SAS RISK MANAGEMENT FOR INSURANCE

• Valuation of life insurance liabilities using a extensive library of function.

• Perform stress testing based on mortality, disability, longevity, expenses

and lapse rates.

• Supports with and without profit and separate account life policies.

• Calculates and aggregates separate risk capital charges

Copyr i g ht © 2012, SAS Ins t i tu t e Inc . A l l r ights reser ve d .

P&C

UNDERWRITING

RISK

SAS RISK MANAGEMENT FOR INSURANCE

• Prebuilt framework for estimating loss reserves.

• Calculates loss reserves using:

• Link ratio

• Chain ladder

• Cape Cod

• Bornhuetter-Ferguson

• Calculates and aggregates risk capital charges.

Copyr i g ht © 2012, SAS Ins t i tu t e Inc . A l l r ights reser ve d .

DATA MANAGEMENT SAS RISK MANAGEMENT FOR INSURANCE

• Fully integrated data management platform

• Insurance data model with pre-built data marts

• In-built data quality routines to ensure maximum value to the business

• Insurance data model implemented and used by clients to support an

Enterprise data warehouse.

• Supports integration with existing financial models

• Creation and inquiry of automatic audit control, data lineage and reverse

impact analysis

Copyr i g ht © 2012, SAS Ins t i tu t e Inc . A l l r ights reser ve d .

REPORTING SAS RISK MANAGEMENT FOR INSURANCE

• Flexible reporting capabilities at Group, Division and Product level.

• Pre-built reporting repository including:

• Asset and liability valuation

• Valuation assumption

• Capital adequacy

• Stress testing analysis

• Dashboard capabilities to publish Key Risk Indicators (KRIs) to web,

Excel, Word, PowerPoint or Outlook.

Copyr i g ht © 2012, SAS Ins t i tu t e Inc . A l l r ights reser ve d .

BENEFITS SAS RISK MANAGEMENT FOR INSURANCE

A complete solution to comply with the entire Solvency II regulations

Fast, reliable and forward looking information for making high value

strategic decisions

A basis for risk adjusted / value based management & for optimizing

decisions like reinsurance programs or investment mix

Perform complex analysis on

how the company is invested

Optimize capital allocation

Protect the company against

unwanted future losses and

realize the expected return by

optimizing investment

strategies, taking into account

risk-capital constraints

Improve the company‘s rating

and reduce the costs of capital

in order to increase the profit

Perform market-consistent

valuation of the total balance

sheet

Reduction of earnings volatility

with better risk management

due to the quantification of the

various risk types

CFO

Avoids risk of failure in

implementing a robust risk

management framework

Meets qualitative regulatory

demands like transparency and

full documentation of the models

and the risk management

processes

Supports risk management

beyond Solvency II, i.e.

implementing economic capital

models

Reduces earnings volatility and

improves financial soundness of

company by anticipating future

risks and mitigating them

Prevents losses – identifies,

quantifies and prioritizes risks

facing the company (via risk

dashboards and reporting)

Promote risk culture within

company – measures and

monitors risk adjusted

performance of the company

CRO

Directly align the risk strategies

with the sales and marketing

strategies, i.e. identify

unprofitable customers,

unprofitable products,

unprofitable regions, etc.

Optimize new business

targets, taking into account

risk-capital constraints,

customer segmentation and

customer value management

Improve competitiveness off

the products

Head of Sales/Marketing

Provides a robust technology

for enterprise risk management

– beyond Solvency II, with a

single, integrated and auditable

platform

Reduces implementation

project risks by providing ready

to use and easily customized

solution

Removes integration issues by

providing the entire solution on

single technology platform

Reduces time and cost by

shortening implementation

cycles and delivering faster

ROI

Protects investments already

made by building around the

existing solutions

CIO

Increase shareholder confidence by reducing volatility and

improving profitability of the company

Increase policyholder confidence by improving the financial

soundness and stability of the company

Grow the company by making products and services more

competitive

CEO

Copyr i g ht © 2012, SAS Ins t i tu t e Inc . A l l r ights reser ve d .

WHY SAS? SAS RISK MANAGEMENT FOR INSURANCE

• Integrated risk solution for insurers = Enterprise Risk Management (ERM) -

interlinking, modelling, simulation, transparency

• Remove current variety of point risk solutions

• Reduce Spreadsheet-Risk through improved integration

• Enables standardization across risk infrastructure

• Adapts to individual customer requirements by application of the SAS

technology

• Provides capabilities to support changing requirements to meet future needs

• SAS investing in new developments in technology and solutions for Risk

Copyr i g ht © 2012, SAS Ins t i tu t e Inc . A l l r ights reser ve d .

CUSTOMER STORY HDI ASSICURAZIONI (ITALY)

Customer Quote

We have met the double objective of improving data quality and streamlining information processes

Francesco Massari, Head of Organization and Information Systems

Business Problem

• Meet Solvency II requirements while improving data

quality and decision-making speed

Results

• Improve data quality

• Timely information reaches business users, actuarial

scientists and senior management

Solution

• SAS Risk Management for Insurance

Copyr i g ht © 2012, SAS Ins t i tu t e Inc . A l l r ights reser ve d .

CUSTOMER STORY P & V (BELGIUM)

Customer Quote

Choosing SAS enabled us to convert our dispersed data into consistent and ready-to-use information, available for the implementation of Solvency II, as well as for improving our risk management framework

Raffaele Barbera, Chief Risk Offocer

Business Problem

• Implementing Solvency II Directive

• Embedding risk assessment into daily activities

Results

• Improves P&V Group's decision-making and efficiency

• Meets its statutory obligations under Solvency II.

• Improved risk management through automatically

generated reports (dashboards, KRIs/KPIs, etc.)

Solution

• SAS Risk Management for Insurance

Copyr i g ht © 2012, SAS Ins t i tu t e Inc . A l l r ights reser ve d .

CONCLUSIONS

• SAS empowers a company to be better able to manage its risk across the

insurance enterprise

• By underpinning the solution sets with a common data architecture,

ensures a consistency of approach across the management of risk

• SAS can provide a complete Enterprise Risk Management framework

Copyr i g ht © 2012, SAS Ins t i tu t e Inc . A l l r ights reser ve d .

MORE

INFORMATION

• Contact information:

Stuart Rose, SAS Global Insurance Marketing Director

e-mail: Stuart.rose@sas.com

Blog: Analytic Insurer

Twitter: @stuartdrose

• White Papers:

Accelerating Solvency II Compliance

Data Management and Solvency II

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