Terms of Transparency

In addition to the need for greater financial transparency and disclosure, insurers face pressure to improve profitability, notes Venkat Mullur, senior director, financial services, TIBCO Spotfire (Somerville, Mass.). "Insurers are looking for analytics tools that can provide true transparency across the enterprise and deeper insight into vast amounts of changing data in order to make more accurate predictions based on scenarios, enabling them to effectively capitalize the business and increase credit ratings," he says.

At many insurers, the ability to achieve transparency is impeded by the separation of capital and group risk management organizations from the actuarial modelers responsible for product pricing, Mullur contends. "Commonly used paper reports and preconfigured dashboards make it impossible for pricing teams to communicate the results of their models, and it impedes the efforts of risk modelers to evaluate how capital may be affected by changing circumstances," he elaborates. "Dashboards only provide results, not a way to ask new questions and instantly see new outcomes."

In order to achieve the level of transparency required to support more accurate predictive models, Mullur adds, the analytic platform needs to be more accessible to a broader base of users, provide access to data residing across systems, and be able to instantly render that data in intuitive ways that can be manipulated by the analyst in order to see it from different perspectives and execute "what if" scenarios.

A large, U.K.-based insurer that declines to be identified has used the TIBCO Spotfire platform to prototype and conceptually test a set of loss models created for Solvency II compliance purposes. According to the carrier, it was able to create an advanced statistical simulation model that generated diversified losses from all material risk factors and their associated products. The platform enabled the insurer to compute economic capital at the product, business unit and enterprise levels, and was able to implement its process and methodology for allocating loss capital at all levels of the organization, down to the individual product. The net effect, the insurer says, has been better assessment of risks and losses resulting from unforeseen market events.

The Spotfire platform is intuitive and highly visual, and its output can be easily communicated to a wider audience of non-technical business users, according to the insurer, resulting in confidence in sharing models externally with regulators and stakeholders, including the company's board of directors.

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See related article on page 22.