Responding to this critical industry-wide need, global professional services firm Towers Perrin is adding to its already robust consulting expertise in the economic capital arena with the development of the Risk Agility™ Economic Capital Aggregator (RiskAgility™ EC). This innovative software application makes it possible for insurers to calculate economic capital more quickly and reliably.
“RiskAgility EC – paired with Towers Perrin’s experience in dealing with economic capital-related issues – is a critical advancement in the way insurers view and handle risk, as it enables near real-time risk and capital management,” said David Dullaway, Towers Perrin Principal and leader of the firm’s global economic capital initiative. “With the ability to make more accurate, timely calculations of economic capital, insurers will be able to demonstrate that their risk governance processes are based upon sound methodologies that are fully embedded in the business.”
According to a recent Towers Perrin survey of insurance companies, use of economic capital in risk-based decision making is set to change dramatically over the next one to two years as insurers embed this approach into other business processes, including strategic and business planning, product design and performance measurement. Combining Towers Perrin’s experience in economic capital design and implementation with the company’s robust RiskAgility enterprise platform, RiskAgility EC works to help insurers make this happen.
Most insurers hold diverse portfolios with varying risk exposures. These portfolios provide diversification benefits, as certain lines of business will often outperform others as the economic climate changes, and buffer the company from both swings in business cycles and market volatility shocks. However, it has often been difficult for insurers to calculate this diversification benefit quickly and accurately enough to be useful in managing day-to-day financial risk. More timely economic capital results provide insurers with a clearer path toward optimum capital efficiency and value creation.
Among the benefits of Towers Perrin’s approach to economic capital utilizing RiskAgility EC:
- Provides robust aggregation capabilities, while fully reflecting dependencies between lines of business
- Allows for capital allocation, including the diversification benefit while bringing together market, insurance and other risks consistently
- Takes advantage of an insurer’s existing financial projection systems; it isn’t necessary for insurers adopting this approach to replace their existing financial models
- Provides immediate, transparent updates for “what if” analysis.
Towers Perrin’s proficiency in economic capital and risk aggregation can help insurance companies gain access to better information more quickly to inform critical business decisions during these tenuous times. Armed with tools such as RiskAgility EC, insurers will be better prepared to meet evolving requirements of regulators, rating agencies and investors. Towers Perrin is a leading expert on economic capital methodology, with extensive experience around the globe assisting clients with economic capital design and implementation.
About Towers Perrin
Towers Perrin is a global professional services firm that helps organizations improve performance through effective people, risk and financial management. The firm provides innovative solutions in the areas of human capital strategy, program design and management, and in the areas of risk and capital management, insurance and reinsurance intermediary services, and actuarial consulting. Towers Perrin has offices and alliance partners in the United States, Canada, Europe, Asia, Latin America, South Africa, Australia, New Zealand and the Middle East. More information about Towers Perrin is available at www.towersperrin.com.
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