Milliman to expand data science and AI capability in the Benelux

Milliman announced that it has expanded its data science and artificial intelligence (AI) capability by taking on the data science consulting team of Ortec Finance.

The new team, in combination with Milliman’s existing data science competence, will continue to support its current customers with data science consultancy projects in the Benelux to generate value from their structured and unstructured data, and to advise them on their strategic journey to become data-driven. Ortec Finance will concentrate on the use of data science in their software solutions.

“Due to digitization, companies across a wide range of industries see their data volume explode. This, in combination with rapid progress in AI technology, leads to a substantial demand for consulting services in this field. We are at the forefront of the era of AI disruption,” says Raymond van Es, who will serve as Lead Data Science & AI of Milliman in the Benelux.

Peter Franken, Milliman Principal, sees it as an important step in strengthening Milliman’s predictive analytics and modelling capabilities in the Benelux. “Having Raymond and his team joining allows us to accelerate expanding our service offering outside the financial industry as well as our technical capabilities in the area of data science and predictive analytics.”

New U.S.-based insurance restructuring mechanism approved

Oklahoma has now made good on its promise to become the leading domicile for a new U.S.-based insurance restructuring mechanism—the Insurance Business Transfer (IBT). In late November 2019, the Oklahoma Insurance Department approved the IBT application (or IBT Plan) of Providence Washington Insurance Company to transfer policies to Yosemite Insurance Company—both companies are part of Enstar Group.

With Commissioner Mulready’s approval, the IBT Plan was sent to the District Court of Oklahoma County with a request for its approval. Despite court delays resulting from the COVID-19 pandemic, on October 15, 2020, the District Court of Oklahoma issued its order of approval and implementation for the first-ever U.S. IBT, allowing for the novation of insurance policies to an assuming insurer without policyholder consent. Enstar worked diligently to push this “intracompany” business transfer forward and has now set the stage for future transfers in this space.

In this article, Milliman consultant Stephen DiCenso, who served as the Independent Expert on this transaction, discusses the benefits to restructuring mechanisms such as the IBT.

Report quantifies flood risk for residential properties in the U.S.

Despite recent efforts to reform the National Flood Insurance Program (NFIP), most U.S. homeowners do not carry insurance to protect their properties against the risk of flooding. For most homeowners, the purchase of this coverage is mandatory only if they live in certain specified high-risk areas. However, significant risk exists in areas where the purchase of flood insurance is rare. Even in areas where flood coverage is required, data from the NFIP and private flood insurers do not indicate high degrees of coverage. 

Beyond direct damages to property and communities, the flood insurance protection gap could have many downstream financial impacts. Homeowners insurance is integral to protecting the collateral that underpins the U.S. mortgage system. As a result, coverage gaps could create adverse financial exposure to bearers of mortgage risk including mortgagees, insurers, reinsurers, federal underwriting agencies, and bondholders. 

In a new Society of Actuaries report, professionals from Milliman and catastrophe modeling firm KatRisk examine the countrywide residential exposure to flooding and downstream implications including its impact on mortgage default risk. They also consider how flooding may be affected by rising sea levels and evaluate how it could affect the financial health of residential householders.

Mortgage default risk drops in Q2 2020, despite pandemic, due to home price growth and refinance volume

Milliman today announced the second quarter (Q2) 2020 results of the Milliman Mortgage Default Index (MMDI), which shows the latest monthly estimate of the lifetime default risk of U.S.-backed mortgages.

During Q2 2020, the economic component of default risk for government-sponsored enterprise (GSE) acquisitions (purchased and refinanced loans backed by Freddie Mac and Fannie Mae) defied expectations, decreasing for the first time since at least Q3 2019 as a result of home price growth and robust refinance volume. In Q2, approximately 70% of mortgage volume was refinance loans, which are considered lower risk relative to purchase loans. Because of this, and an increased demand for housing, overall default risk for GSE loans decreased, from 1.99% in Q1 2020 to 1.74% in Q2.

Low interest rates have driven homeowners to refinance in record numbers, with 2020 refinance volume exceeding $1 trillion and totaling more than the volume of 2018 and 2019 combined. That, coupled with home price growth, has resulted in an improvement in mortgage default risk in Q2, despite the economic stressors from the COVID-19 pandemic.

For Ginnie Mae acquisitions, the MMDI rate increased from 10.33% in Q1 2020 to 10.61% in Q2 2020, driven mainly by increased refinance volume. Many of these loans were originated through streamlined refinance programs, where a credit score is not provided. A credit score of 600 is conservatively assigned, which increases borrower default risk during heavy refinance periods

The models used in Milliman’s MMDI analysis rely on home prices to forecast default rates, and do not rely on unemployment rates, nor do they have specific adjustments for special legislative actions or programs such as the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

For more information, click here.

Enhancing ERM frameworks based on learned lessons from COVID-19 pandemic

COVID-19 has illuminated the wide-ranging impact that emerging risks can have on insurers across the globe. It has focussed attention on a grey area that exists in recognising when an emerging risk has fully “emerged” and how it should be treated. It would seem logical that once an emerging risk is realised, its subsequent monitoring and management should fall under a pre-existing risk management framework.

In this briefing note, Milliman professionals discuss how traditional enterprise risk management (ERM) frameworks may not fully capture the complexity of an emerging risk event, and reflect on some lessons that can be learned from the COVID-19 pandemic.

Milliman launches AccuRate Fleet at InsureTech Connect 2020, introducing new telematics-based risk score for commercial auto insurers, MGAs, and start-ups

Milliman today announced a new innovation in the insurtech space: AccuRate Fleet, a telematics-based risk score created with Azuga, Inc. to help improve commercial auto insurer profitability.

Milliman teamed up with Azuga, a leading provider of connected vehicle and fleet technology, to study how fleet driving behavior coupled with actual accident data can lead to predictive models for commercial auto insurers. Using 1.5 billion miles of Azuga commercial auto driving data and 5,700 accident reports, Milliman modeled the indicators of crash frequency and created a risk index to help insurers, managing general agents (MGAs), and start-ups in the commercial auto space price risk better.

“Commercial auto insurers have faced years of worsening combined ratios, and with this product we strongly feel that we can guide insurers to assess and price risk more accurately,” said Peggy Brinkmann, a principal at Milliman and codeveloper of AccuRate Fleet. “There’s an opportunity here for those in the commercial auto space to use existing and widely accepted technology and optimize their risk pools quickly.”

“Commercial auto has become an increasingly challenging market for building a profitable customer base and insurers can’t simply keep raising rates,” said Ananth Rani, cofounder and CEO of Azuga. “Azuga Fleet telematics has demonstrated significant reductions in accident frequency and severity at scale. The AccuRate Fleet score from Milliman further cements our leadership in delivering results both to the insured fleets and now the insurance carriers.”

To read more about AccuRate Fleet, click here.

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