18 December 2014 News

Guy Carpenter updates reserve risk model

Reinsurance broker Guy Carpenter has launched a new version of one of its reserve risk modelling tools.

The company said MetaRisk Reserve 4.0 provides a new, simplified interface that gives users the ability to work with multiple lines of business in a single workbook, as well as multiple reserve models in a single line of business.

It has also upgraded the available statistical models to quantify reserve risk and model future inflation across multiple segments by giving users more flexibility to help with Solvency II and ORSA requirements.

“MetaRisk Reserve 4.0 helps clients better understand and interact with the drivers of reserve risk,” said Steve White, chief actuary and head of enterprise analytics for Guy Carpenter. “This new release furthers our commitment to developing a broad spectrum of economic capital modelling solutions, which enables insurers of all types and sizes to more effectively assess key risks, benchmark risk profiles, allocate capital, meet regulatory and rating agency requirements and strategise for the future.”

The company also noted that reserve risk is the largest risk on many insurers' balance sheets and affects both solvency and earnings volatility. Changes in calendar year trends, such as inflation increases, are the biggest drivers of reserve deficiencies. Most reserving models cannot capture inflationary trends and, as a result, ignore this risk.

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