Moody's Analytics insurance valuation solution supports the valuation of liabilities of complex insurance products containing options and guarantees. Valuation of liabilities is central to many reporting standards, including Solvency II, Market-Consistent Embedded Value (MCEV), and IFRS 17.
Valuation of complex policyholder guarantees typically require a scenario-based approach, using sophisticated, stochastic models of economic risks, combined with a detailed asset and liability management (ALM) model of the insurance business. Moody's Analytics Economic Scenario Generator includes models that provide the forward-looking, risk-neutral scenarios for economic variables and asset returns required for an ALM model. The model can then be used to value projected insurance liability cash flows consistently with those observed in the market.
For the valuation of liabilities, our models are calibrated to market prices, allowing a market-consistent value to be calculated. Calibration is the process of parameterization of models against market data. Moody's Analytics provides an extensive calibration service, updated every quarter end, that covers 30 economies with a range of market-consistent calibrations tailored to the challenges faced by insurers.
Automate your scenario production
With regulations and best practices evolving rapidly, insurers’ valuation and reporting processes are under pressure. As a result, insurers must generate more scenarios than ever before within shorter time frames. Moody's Analytics scenario automation capabilities manage these process steps without input from the user. The process can then be repeated many times to cover all required stress scenario sets.
Calculate regulatory capital based on market-consistent valuation of liabilities
Current and emerging regulatory regimes require technical provisions to be based on the market-consistent valuation of liabilities. For example, many insurers use the Economic Scenario Generation models for Solvency II, Swiss Solvency Test (SST), South African Solvency Assessment and Management (SAM), and other similar regimes around the world.
Director, Insurance Product Management Team
Stephen has many years of experience working with scenario generators and stochastic modeling, including calibration, development, and support. Since 2010, Stephen has led the development of the B&H Economic Scenario Generator (ESG) product suite. Stephen has also spent three years leading the delivery of the ESG calibration services, technical support, and training.
The Market-Consistent Economic Scenario Generator contains stochastic asset modeling tools in a flexible framework to produce risk-neutral scenarios.
Moody’s Analytics Scenario Service provides economic scenarios that describe plausible future paths of variables that are coherently related.