Barrie & Hibbert

The insurance industry is increasingly using Economic Capital as a tool to understand and manage their business, whether driven by regulators, rating agencies, or just a desire to adopt modern best practice. Determining Economic Capital under the 1 year VaR measure involves multiple valuations over a distribution of meaningful and economically coherent scenarios, presenting two distinct challenges:

Liability Proxy Service

Our Liability proxy service uses statistical regression-based techniques to fit a model to liability valuation, using the Least Squares Monte Carlo approach. For complex liability books, the resulting proxy can be evaluated extremely quickly, decoupling risk management reporting (e.g. for Solvency II SCR) from lengthy actuarial valuations.

Risk Aggregation Services

Modelling risk factors and aggregating them is at the heart of what we do. We have a team of economists who review historic market data and set forward-looking targets for our real-world models. They employ a number of different techniques for analysing historic market data, layered with expert judgement that we can bring to bear on client engagements.

Clients recognise our strengths and often want us help them solve problems that require more that our core products offer. For these clients we engage in projects to develop solutions and tools specific to their needs.

Our consultants help you understand both your technical requirements and non-technical constraints (e.g. budget, internal expertise, timing, etc) and create a plan to develop a solution. In order to keep the fees at a minimum we aim to re-use common components as much as possible, building upon our extensive code base.

Recognised by clients for our deep technical abilities, our pragmatism and integrity we provide expert advice on a range of insurance related topics, including:

• Risk management product design and pricing – we provide advice to the risk management suppliers to the insurance and pension industry such as asset managers and investment banks.
• M&A valuation advisory – we have helped clients considering M&As to value their target acquisition. We provide a detailed understanding of how liability valuation is affected by various assumptions which can be used to better understand the true current and future value of the target.
• Risk and capital management strategy – we have helped clients design, develop, test and review market risk and capital management strategies for a range of insurance products.
• Market-consistency research – we have helped clients develop their understanding of financial market instruments, the available data sources and how to use models to extend prices beyond those observed in the market. An example of our work in this area is the Liquidity Premium research sponsored by a leading industry body.