IBM Case Studies PREPAR-VIE Gearing up for Solvency II with advanced stochastic modeling

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	PREPAR-VIE Gearing up for Solvency II with advanced stochastic modeling IBM

PREPAR-VIE Gearing up for Solvency II with advanced stochastic modeling

IBM

Technology Category	Analytics & Modeling - Predictive Analytics
Applicable Industries	Finance & Insurance
Applicable Functions	Business Operation
Use Cases	Regulatory Compliance Monitoring
Services	Data Science Services
Challenge	PREPAR-VIE, a life assurance filial of BRED Banque Populaire, needed to be ready for the Solvency II Directive that governs insurance firms in the European Union. This directive sets quantitative requirements for the amount of capital each insurer must legally hold, known as the solvency capital requirement (SCR). However, PREPAR-VIE lacked a formal solution for asset-liability management (ALM), making it impossible to calculate the best-estimate liability for the SCR in a timely and efficient manner. Previously, the business only needed to make provisions within a one-year horizon, which their financial systems could handle. However, to perform the stochastic projections required for Solvency II, they needed a new approach. Read More
About Customer	Established in 1984, PREPAR-VIE is the life assurance filial of BRED Banque Populaire. With annual premium income of more than EUR500M, PREPAR-VIE creates and manages savings and life insurance contracts for more than 160,000 individuals. The company needed to be ready for the Solvency II Directive that governs insurance firms in the European Union. This directive is designed to protect consumers and reduce systemic risk by setting quantitative requirements for the amount of capital each insurer must legally hold, known as the solvency capital requirement (SCR). Read More
Solution	To meet the requirements of the Solvency II Directive, PREPAR-VIE implemented IBM Algo Financial Modeler. The actuarial team at PREPAR-VIE built, and continues to refine, a stochastic model covering around 1,000 stress scenarios using this tool. The model takes into account the full range of possible risks and their probabilities, enabling it to determine the likely future value of assets and liabilities. PREPAR-VIE uses the IBM solution’s embedded Excel add-in to feed this output into Excel, aggregating it with estimates from other systems to prepare the best-estimate liability. This solution simplifies the whole process around Solvency II and is estimated to be 20 percent faster than a competing solution. Read More Log in to view content
Contents

Technology Category

Analytics & Modeling - Predictive Analytics

Applicable Industries

Finance & Insurance

Applicable Functions

Business Operation

Use Cases

Regulatory Compliance Monitoring

Services

Data Science Services

Challenge

PREPAR-VIE, a life assurance filial of BRED Banque Populaire, needed to be ready for the Solvency II Directive that governs insurance firms in the European Union. This directive sets quantitative requirements for the amount of capital each insurer must legally hold, known as the solvency capital requirement (SCR). However, PREPAR-VIE lacked a formal solution for asset-liability management (ALM), making it impossible to calculate the best-estimate liability for the SCR in a timely and efficient manner. Previously, the business only needed to make provisions within a one-year horizon, which their financial systems could handle. However, to perform the stochastic projections required for Solvency II, they needed a new approach.

About Customer

Established in 1984, PREPAR-VIE is the life assurance filial of BRED Banque Populaire. With annual premium income of more than EUR500M, PREPAR-VIE creates and manages savings and life insurance contracts for more than 160,000 individuals. The company needed to be ready for the Solvency II Directive that governs insurance firms in the European Union. This directive is designed to protect consumers and reduce systemic risk by setting quantitative requirements for the amount of capital each insurer must legally hold, known as the solvency capital requirement (SCR).

Solution

To meet the requirements of the Solvency II Directive, PREPAR-VIE implemented IBM Algo Financial Modeler. The actuarial team at PREPAR-VIE built, and continues to refine, a stochastic model covering around 1,000 stress scenarios using this tool. The model takes into account the full range of possible risks and their probabilities, enabling it to determine the likely future value of assets and liabilities. PREPAR-VIE uses the IBM solution’s embedded Excel add-in to feed this output into Excel, aggregating it with estimates from other systems to prepare the best-estimate liability. This solution simplifies the whole process around Solvency II and is estimated to be 20 percent faster than a competing solution.

Impact #1	Simplified and accelerated regulatory reporting
Impact #2	Enabled stochastic modeling in support of best-estimate liability
Impact #3	Provided easy access to a complete archive of past calculations, enabling historical comparisons and trend analysis

Impact #1

Simplified and accelerated regulatory reporting

Impact #2

Enabled stochastic modeling in support of best-estimate liability

Impact #3

Provided easy access to a complete archive of past calculations, enabling historical comparisons and trend analysis

Benefit #1	20 percent faster computations than a competing solution

Benefit #1

20 percent faster computations than a competing solution

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Overview

PREPAR-VIE Gearing up for Solvency II with advanced stochastic modeling

Operational Impact

Quantitative Benefit