We measure the linkages between the economic environment and each of your insurance lines in every country, and advise on how the future economic outlook will affect claims exposure. Our clients achieve a forward looking management of their books, avoiding future less profitable areas, and focusing on those positively influenced by the future economic climate.
A constantly changing economic environment makes it difficult to evaluate the potential risks facing the business so we provide insurers tailored economic scenarios and assessment of their probability, and we advise on the plausibility of scenarios already used for stress testing. Insurers incorporate realistic economic scenarios into their stress testing programme, which in turn creates stress testing results that are much better at indicating potential business outcomes.
Volterra advise insurers on how to link economic scenarios to business performance as part of the stress testing exercise. We also provide modelling assistance in linking the two areas and enhancing existing models.
Understanding the possible exposure to economic risks allows insurers to put in place the right control measures, and limit their exposure to the level desired by shareholders and other stakeholders.
The company required help at exploring potential opportunities in different markets.
Our work involved:
- analysis of economic prospects in different economies and the implications for their business lines
- examination of the impact potential shocks such as Eurozone exit would have on business lines in different countries
- review of sovereign debt prospects and implications for future claims
- identification of potential global revenue growth drivers for Marine, Energy, Species and Professional Liability lines based on future socio-economic factors, as well the political environment
Our work was used to support the company’s growth strategy through presentations at strategy away days, discussions with heads of business lines, and provision of tailored reports, forecasts and data.
On another occasion the same company requested our help when looking to grow its European business; they were concerned about the potential increased exposure to the Eurozone crisis.
The historic claims data for the lines the company was looking to expand was relatively benign, but the underwriters could not ascertain how representative the historic claims performance was of future performance. We built a number of models, using econometric techniques, that linked the economic environment to claims for the lines and geographies that the underwriters were interested in. Our work confirmed the influence of the economic environment on claims and quantified the impact. The models were then used to create projections of claims for each insurance line and country over the next five years under two alternative economic scenarios. The company used the projections to guide its growth strategy in these areas.