Solvency II and parallel risk-based capital regimes in China, Latin America and South Africa have been a focal point for many of our recent developments.
Prophet is purpose-built to handle cash-flow projections, which are essential for the calculation of the Best Estimate Liability, whether calculated deterministically or stochastically. Prophet is also able to perform projections on multiple calculation bases, making it the ideal tool for obtaining the stress test components of the Solvency Capital Requirement, and then performing the aggregation and projection of SCR necessary to obtain a full Solvency II balance sheet.
However, the challenges presented by Solvency II reach far beyond just the calculations. A suite of products has been built up around the core Prophet application to facilitate governance of the Prophet model, experience analysis and the input of assumptions, handling of results data in a formal database environment, and a process controller to oversee the end-to-end reporting process.
Prophet Professional is an integrated suite of actuarial systems, designed to perform actuarial calculations including profit testing, reserving, asset/liability modelling, stochastic modelling and risk management. Prophet Professional builds optimised programs from libraries of reusable code, sharing definitions between common calculations, thereby enabling insurers to use the same code across different departments, entities and territories.
The Nested Structures system module represents a major enhancement in Prophet’s ability to handle complex modelling. Nested Structures essentially allows you to join together your existing models through a series of control interfaces, which reduces the need to write extensive code to achieve new and more complex modelling tasks, and ensures that existing models can still be used in isolation for their original purpose.
In the context of Solvency II, Nested Structures enables the systematic running of SCR stress scenarios on either a deterministic or stochastic basis, the projection of the SCR to calculate the Risk Margin, and the ability to wrap a projection layer around the whole model in order to project the Solvency II balance sheet with allowance for management actions based on risk-based capital requirements.
In addition to providing the calculation engine, we offer a range of actuarial libraries, which hold the variables, definitions and formulae to perform the full range of actuarial calculations, from pricing and profit-testing, traditional valuation techniques, embedded and appraisal values, to asset/liability modelling, dynamic financial analysis and other stochastic projections. Certain libraries are designed to calculate the Best Estimate Liability ("BEL") and the impact on the BEL under market and insurance stress tests. The ALS and Summary libraries perform calculations of the SCR, MCR and Risk Margin using the Nested Structures feature of Prophet. Each library can be licensed individually, so you can choose only the functionality that suits your needs.
Prophet Enterprise combines the advanced actuarial modelling of Prophet Professional with a powerful production platform and control framework, utilising the latest technology to rapidly and efficiently execute models built in Prophet Professional. Prophet Enterprise harnesses grid computing clusters to maximise processing power, resulting in reduced costs and increased productivity, and freeing up staff and processors to focus on critical activities. The combination of model governance framework and processing power makes Prophet Enterprise both best practice and business necessity in the response to Solvency II.
Glean is an experience analysis and data mining tool which is part of Prophet’s actuarial modelling solution. It provides the capability to analyse and interpret a wide range of experience data based on user-defined risk factors. Glean is available as a stand-alone application or integrated into the Prophet suite, and can therefore form a key part of the control environment .
Prophet Data Management Platform integrates the core Prophet offering into insurers’ wider risk management environment. Key components of this offering are the Prophet Results Database and Insurance Data Repository, which offer a formal database storage for Prophet results suitable for incorporation into a data warehouse, and the Process Controller, which automates the end-to-end business process.
For the latest thinking on running your business in a Solvency II world, please click here.