New insurance solution introduced for liability product development and risk management
Numerix, the leading provider of cross-asset analytics for derivatives valuations and risk management today introduces Numerix Leading Hedge, an insurance solution for risk management and hedging of annuity products, including Variable Annuities and Fixed Index Annuities.
Since the acquisition of Leading Hedge from Ernst & Young LLP in mid-2010, Numerix has leveraged the platform to deliver a new, highly scalable and flexible solution for the hedging and reporting of various annuity products. Leading Hedge clients can expect to achieve faster time to market on new product designs and greater economic effectiveness of their respective hedging programs. Rapid product development and customization is made possible using Numerix’s revolutionary “scriplet” technology. Clients have access to payoff code making it easy to introduce new products into the system without an upgrade or having to face excessive internal or consulting costs. Leading Hedge can also be easily integrated into clients’ existing infrastructure with its unique data extensions and mapping technology.
“The post financial crisis environment has created new challenges for variable annuity managers and the call for more effective risk and hedging strategies presented a unique opportunity for Numerix to innovate and bring model enhancements from capital markets to the insurance industry,” said Numerix President and COO, Steven R. O’Hanlon. “With Leading Hedge, clients are able to quickly model and hedge the most complex design features such as target volatility and constant proportional portfolio insurance (CPPI),” he added.
As insurance-industry best practices evolve, solution providers have needed to keep pace in terms of sophisticated modeling techniques that give issuers the ability to design and manage inherent risk over a product’s lifecycle. Numerix understands the need for a consistent capital market model framework where clients can leverage Numerix’s comprehensive library of models and methods to institute a consistent pricing framework across all areas of their business, enhancing the effectiveness of hedges.
“We are encouraged to see additional software solutions becoming available to meet the increasingly complex modeling, valuation and risk management needs of insurers,” says Mike Hughes, a Principal at Ernst & Young LLP.
Over the past year, Numerix has on boarded several Variable Annuity and Fixed Index Annuity clients who are already utilizing Leading Hedge’s key features and benefits, which include:
- Out of the box support for all flavors of VA’s and FIA’s including Withdrawal Benefit (WB), Income Benefit (IB), Accumulation Benefit (AB) and Death Benefit (DB) in the VA space and Point-to-Point, Call Spread, Cliquet, Binary (Digital) and Asian Rainbow structures in the FIA space.
- A revolutionary “scriplet” technology which provides full control, flexibility and transparency on the liability cash flow logic allowing Numerix clients to innovate through their unique and customized product designs.
- Ultra-fast Monte Carlo processes for risk-neutral valuations and higher-order Greeks that can be scaled across compute grids providing near linear scalability and faster turnaround of hedging grids and other reports.
- Numerix’s hybrid framework which allows users to combine marginal models from multiple risk factors, tying them together with a correlation matrix.
- Robust liability trading grids and trading analytics across a variety of market shocks for the intraday rebalancing of hedge assets.
Advanced analytics for asset liability management is available through the full suite of Numerix Leading Hedge insurance solutions, which includes:
- Numerix Leading Hedge for liability product development and risk management – Production Platform for end-to-end risk management and hedging of annuity products, most notably Variable Annuities and Fixed Index Annuities. Flexible in nature, can be run as client server, gridded or cloud.
- Numerix CrossAsset – An extremely flexible and powerful actuarial workbench for the design and pricing of insurance products and hedge assets.
- Numerix Market Risk – A robust investments platform for pricing and risk management of General Account and Hedging programs. Modular in approach, providing mark to market, scenario analysis, portfolio attribution and Value at Risk. Advanced Replicating Portfolio module for Liability Driven Investing (LDI).
- Numerix Economic Scenario Generator (ESG) – A sophisticated stochastic simulation framework for producing risk neutral and real world economic scenarios that can be used across all lines of business for all work products.