Algorithmics partners with Barrie & Hibbert and SecondFloor to deliver the insurance industry with Solvency II solutions

Algorithmics, Barrie & Hibbert and SecondFloor announced today that they are working in partnership to deliver Solvency II solutions for insurance companies of all sizes. The solutions, comprising an end-to-end analytical framework and process, will enable insurance companies to measure, manage and report Solvency Capital Requirements (SCR) under Solvency II regulations and will be offered both as deployed software and as a managed service.

The solution will combine Algorithmics’ award winning Algo Risk with Barrie & Hibbert’s extensive economic scenario services and SecondFloor‘s experience in building risk reporting workflow and process controls.

At the core of the solution is Algo Risk, providing insurance companies with an enterprise-wide internal model framework. Algo Risk offers a number of practical methods to assist insurers to calculate their Solvency Capital Requirements (SCR), including Replicating Portfolios, Curve Fitting, Standard Formula and advanced copula-based risk aggregation.

Barrie and Hibbert will provide a coherent approach to replicating and curve fitting scenario selection and weighting, the associated liability-specific asset selection for replicating portfolios, and real-world scenario calibration in the context of Solvency II requirements. This will ensure that there is a close fit between the replicating portfolio or fitted curve and the initial value of the technical provisions and that there is a high degree of replication accuracy when undertaking an SCR or other economic capital calculations.

In conjunction with Algorithmics, SecondFloor has designed and built a workflow component that will enable users to manage reporting periods and data based on a company-wide hierarchical structure, submit and approve portfolio replications, and initiate final reporting. The new component, which will be bundled into the Algorithmics solution, will provide a comprehensive risk management platform that integrates portfolio replication, curve fitting, and risk aggregation within a risk management and reporting infrastructure which is auditable, automated and centralized.

Curt Burmeister, Vice President of Risk Solutions, Algorithmics, said: "We already have strong working relationships with both Barrie & Hibbert and SecondFloor and together we have pioneered the use of portfolio replication among large insurance companies who were looking for industry leading solutions for their capital and real-time risk management and reporting. Our Solvency II solution now offers insurers a range of options for calculating their Solvency Capital Requirement, whatever their size or required level of sophistication.”

Andrew Barrie, Executive Director and Founder, Barrie & Hibbert, added: “Many insurers already have strong processes, using our scenario generation models, for economic and regulatory capital valuation. The challenge for Solvency II in general, and the use of internal models in particular, is extending these processes, filling the gaps, creating greater transparency, providing full audit trails, and facilitating ‘real time’ risk management. Working with Algorithmics will mean that insurers will get a market leading solution to the challenges of building their ERM frameworks.”

Martin Knook, CEO and Co-Founder of SecondFloor, explains: "We are delighted to have formalized our existing relationship with Algorithmics. We have already worked together on three global insurance projects and jointly won an IT innovation award. We know that we have a market leading workflow solution to implement Solvency II governance systems that is proven with some of the world’s biggest insurance companies and now we look forward to standardizing our experience for the rest of the insurance industry.”

Algorithmics, Barrie & Hibbert and SecondFloor will be exhibiting at the Life Conference 2009 in Edinburgh, Scotland, on 26th and 27th November 2009 and showcasing the Solvency II offering there.