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SunGard Poll Highlights Changes in Actuarial Risk Modeling Practices among North American Insurance Carriers

SunGard has released the results of a survey on actuarial risk modeling in North America, which highlights increased demand among insurance carriers for sophisticated solutions as traditional spreadsheet models lack the rigor and governance required by today’s actuarial practices.

The survey asked 40 North American life and non-life insurers to provide feedback on the key business drivers leading to change in how they make technology decisions. Respondents included actuaries, actuary department heads, chief risk officers and other senior executives.

Key findings of the report include the following:

  • 46 percent said the chief actuary either makes the final decision or leads a selection committee to acquire actuarial modeling technology
  • More than 70 percent of respondents indicated that they would benefit from a single platform for both valuations and projections
  • 40 percent indicated they are using spreadsheets or internally developed systems to perform financial projections, and 31 percent are using them to perform valuations
  • 21 percent said they plan to enhance their actuarial modeling capabilities within the next 12 to 24 months

“Only half of U.S. insurers use formal modeling controls and over one third manually source data. Actuarial risk modeling is often done on spreadsheets, which has become more complicated over time with minimal documentation and automation, and a high degree of customization. With today’s evolving risk landscape, more interconnected and volatile financial markets, and tighter regulation, insurers have an opportunity to leverage configurable actuarial systems that can manage financial risk while minimizing operational risk.” – CEB TowerGroup research director Sam Stuckal.

 “The traditional role of the actuary is changing from that of a number-cruncher to a trusted advisor and contributor to strategic decision making. This role change is in a perfect storm with regulatory pressures, causing insurers to place greater emphasis on data and process governance, risk transparency and compliance, and improving the speed, accuracy and efficiency of their actuarial modeling tools. By centralizing data, models and workflows, leveraging business intelligence, and adopting cloud-based solutions, insurance carriers in North America can better position themselves for profitability and growth.” – Bill Diaz, president of SunGard’s insurance business.