Category Archives: Actuary

Milliman updates Claim Variability Benchmarks with valuable industry data for P&C insurers

Milliman announced today that it has released version 2.0 of its Claim Variability BenchmarksTM (CVB), an insurtech solution that helps property and casualty (P&C) insurers increase efficiencies and provides richer analysis in the face of regulatory and economic change such as reserve range and cash flow requirements, Solvency II, and International Financial Reporting Standard (IFRS) 17.

As part of the firm’s family of state-of-the-art actuarial reserve analysis systems, this release of CVB adds new industry benchmarks for claim frequency, severity, and loss development patterns for all major P&C insurance coverages, helping actuaries better model and understand their claim costs. Additional benchmarks are provided to help measure the correlations of experience among various lines of business. The new system also adds both Mack and Merz- Wüthrich distributions to aid insurers working with Solvency II and IFRS 17 reporting.

In addition, the new release provides a free version so that all actuaries can easily evaluate these important benchmarking tools.

Our CVB solution is specifically designed to help our clients, and insurers of all sizes, better understand their data and compare their trends and results to industry benchmarks. This release provides a number of new and  sophisticated calculations, so actuaries can gain more confidence in their estimates and focus on the areas where their substantial expertise can provide the most value to their organizations, especially important in this time of pandemic-based industry disruption.

To learn more about Milliman’s Claim Variability Benchmarks, click here.

Emerging actuarial outsourcing trends

Globally, for several years, insurers and reinsurers have been outsourcing actuarial work to captive units or third-party service providers. Over the past couple of years, there has been renewed interest in actuarial outsourcing, with an increasing number of insurers and reinsurers either setting up new outsourcing units or expanding their existing ones.

This trend is especially true for life insurance companies, which are under increasing pressure to reduce costs, especially in the face of demanding regulatory changes. In order to uncover trends related to actuarial outsourcing services in the life insurance industry, Milliman consultants conducted a survey of outsourcing units of life insurers and reinsurers with global operations. While the outcomes of the survey reaffirm some prevailing notions, they also uncover some emerging trends.

To learn more, download Milliman’s “Global life insurance / reinsurance actuarial outsourcing survey.”

Chief modeling officers provide value in a new actuarial modeling world

Understanding the business versus the operational skills and activities related to modeling holds the key to the new actuarial operating model. When these differences are recognized and each function is empowered to focus on what it does best, the resulting sum of the two parallel functions is greater than the original comingled model. Milliman consultant Van Beach provides more perspective in The Actuary article “Undeniable Synergy: A case for the chief modeling officer.”

Predictive modeling considerations for actuaries

Predictive modeling has emerged as a field that requires judgment at nearly every step. What are the best ways to implement predictive modeling into relevant areas of actuarial practice? This Society of Actuaries paper by Milliman consultants provides more perspective.

Actuaries will be key in the role of Independent Expert for legacy liabilities

In 2018, Oklahoma became the center of discussion of the U.S. run-off insurance market. Oklahoma’s Insurance Business Transfer Act created a buzz as the U.S. market now gets even closer to its first ever deal to transfer and novate insurance policies from a transferring insurer to an assuming insurer without policyholder consent by way of an insurance business transfer (IBT). This legislation gives insurers and reinsurers of U.S. risks much needed finality with respect to obligations for liabilities.

An essential voice in this process is the Independent Expert (IE), whose role has traditionally been filled by an actuary in venues outside the United States. The Independent Expert provides insight and perspective on the fairness of the transaction to the regulators and courts that must ultimately approve the transfers. Policyholder protection is the most important consideration in the IBT and the role of the IE is critical in protecting the interests of the policyholders from both the assuming and transferring companies.

Under the Oklahoma IBT law, the companies involved in transferring and assuming the business must jointly provide a list of IEs, from which one is selected by the Insurance Commissioner. The IE ultimately works for the state court and is relied upon to assess the terms of proposed transfers with specific focus on protecting the interests of the policyholders involved.

In this article, Milliman’s Stephen DiCenso and Tom Ryan provide background on this new opportunity for all companies with legacy liabilities and discuss why actuaries will be at the center of that process.

A quantum leap in benchmarking P&C reserve ranges

Traditional development pattern benchmarks have provided some support in estimating fundamental liabilities, but even here, the process has long been a one-dimensional exercise, at least until now. A recently developed benchmarking tool, which includes percentiles at all stages of development, allows for the calibration of a benchmark that better resembles your portfolio. As such, this rigorously back-tested tool can provide actuaries an added level of confidence in the reasonableness of an entity’s reserve ranges. The next generation benchmarking tool, known as claim variability guidelines, is derived from extensive testing that involved all long-tail Schedule P lines of business and more than 30,000 data triangle sets. Milliman’s Mark Shapland provides perspective in this article.