From Regulatory-driven Risk Operating Models to Improved ECM and Client Centricity

Efficiency and Innovation: From Regulatory-driven Risk Operating Models to Improved ECM and Client CentricityEric Jeanne and Markus Salchegger Accenture Finance & Risk Services

RiskMinds Insurance 2016Amsterdam, March 23rd 2016

Agenda

Technology drivers that require new thinking around efficiency and

innovation for Chief Risk Officers and Actuaries

Risk management to be applied beyond current corporate areas to help

improve Economic Capital Management (ECM) and increase

client centricity

Conclusion: Technology Vision 2016 – Emerging trends for

Insurers

Copyright © 2016 Accenture All rights reserved. 2

3

Insurers are facing increasing constraints in Finance, Risk and Regulatory areas, pushing them to rethink operating modelsHigh level challenges and trends in the insurance industry

Copyright © 2016 Accenture All rights reserved.

Regulatory Pressure• Increasing transparency • Growing financial/reporting standards• Rising complexity

Economic Pressure• Continuous low rates environment• Market pressure on financial results • Decreasing amounts of free/available

“Own funds”

Cost Pressure• Operational efficiency• Cost reductions• Value-adding services

New Technologies• Technological innovations

(Big Data, Internet of Things, Analytics)

• Standardization and automation

• Data analytics

NEWOPERATING

MODEL

4Copyright © 2016 Accenture All rights reserved.

Disruptive technologies for efficiency and innovationDigital is impacting the Finance and Risk operating models

Organization

Processes

ITData

Blockchain Big Data/Analytics

Cloud Cyber

New visionWorking processes

Digital risk-awarenessNew skills

Agile methodologiesData-driven decisions

Disruptive technologies have placed Finance and Risk functions in a state of digital culture shock, facilitating the use of more technology by their people to perform more, thus gaining a decisive advantage by creating a thriving digital corporate culture

Robotics

Robust monitoring and reduction of cost of capital

Mini-bots “phantom FTE” automation of tasks and activities

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Robotics and Blockchain technology is starting to play a significant role in companies’ automation strategyHelp insurers become more efficient and eliminate unnecessary intermediaries


Robotic process automation with focus on repetitive and rule-based processesCognitive computing – adaptive, interactive technology with ”learning“ capabilitiesDigital/virtual assistance – computer-generated conversations, question answering...

Automation of regulatory reporting and enhanced time efficiency for financial instruments settlement

Improved security and transparency of data and informationSecure transaction ledger database to reduce the overall number of applications and IT infrastructure costs

Organization

Processes

IT

Data

BLOCKCHAIN

ROBOTICS

6

Navigating Finance and Risk IT operations efficiency to realize the flexibility and control to drive agilityThe new data and IT landscape for the insurance industry


Organization

Processes

IT

Data

Shared services initiative

Data-based decisions

Reduced processing costsAgile data visualization and leveraging unstructured data

Large scale machine learning

Multi-enterprise resource planning (ERP) rationalization

Mobile enablement

Infrastructure investment avoidance

Risk reduction strategy1st line-of-defense controls, countermeasures and protections

Risk awareness, modeling and simulations

Cyber resilience and data protection

Detection, identification and operational monitoring

BIG DATA/ANALYTICS

CLOUD COMPUTING

CYBER

Agenda






client centricity


Insurers


The evolution of Risk Management will play an important role in transforming operating models for improved client centricityThe evolution of Risk Management typically follows waves

Risk

Man

agem

ent

Evol

utio

n St

ages

Time

1. Cross-functional AdoptionsAdopted in selected, closely related corporate functions such as Finance and Accounting

2. Group-wide CentralizationCentral provision of RM methods, technology and data for company-wide usage in core insurance domains

3. Next Generation Risk ManagementImproved client centricity with new touch points

and self service

9

ECM has integrated capital management framework for strategy setting, capital allocation, balance sheet and risk managementExample of ECM use to facilitate improved capital allocation


Enhanced Underwritingto generate top-line growth

Improved Capital Managementto strengthen profitability across the company/group

Robust balance sheet and higher cash generation

+ =

OBJECTIVES

IMPLEMENTATION IN FINANCE AND RISK

ECM BENEFITS Insight on capital

performance and enhanced capitalization

Provides opportunity to pre-empt emerging regulatory requirements

Transparency of highest value creating activities to support planning, pricing, reserving, steering and strategic decision making

Capital Adequacy Risk Management• Owner of ECM,

methodology, calibration

• ECM output for external prudential reporting

Capital Allocation and SteeringFinancial Planning/Accounting• Scenario analysis to

strengthen risk-adjusted returns

• Consistent treatment of ECM output across the group

• Facilitate decision making on M&A opportunities

ENHANCEMENTSCENARIOS

CAPACITY


The dynamic of competing for capital within groups and divisions should tremendously change in the future Capital allocation is of greatest importance to insurance groups

Across insurance groups a consolidated group-wide risk vision aligned to global capital requirements is recommended using an enhanced capital allocation process

The “new” capital allocation process should be implemented at the following organizational levels

Through the definition of one/multiple common solvency strategic indicator(s) (reflecting group-risk appetite) and which ought to be evaluated by management at each strategic decision point

Through an adequate risk limit management process aligned to the company’s global solvency indicator

Steering Level

Line of Business/Geography/ Business Unit Level

KEY SOLUTION ELEMENTS

• Usage of prospective tools/methods allowing easy, rapid and accurate capital requirement calculation in line with regulatory framework

• Ability to control risk limits at multiple levels of detail (portfolio, business unit, geography, risk module, etc.) with sensitivities conducted based upon market trends and investments choices

THE CHALLENGE


Scenario-driven capital allocation approach can generate value in comparison to traditional approachExample of capital excess allocation: scenario-driven approach

Division IV

ECM

GroupECM

Division I

Division II

Division III

Motor Property Marine

ECM

25m 25m 25m 25m

15m 5m 5m

ECM ECM

CHARACTERISTICS • Capital steering is driven by top-down analysis from the

group• Capital is allocated to each division • Divisions subsequently allocate capital to different lines of

business• All divisions have ECM modules that are centrally

maintained and locally parameterized• ECM across divisions characterized by different levels of

sophistication• Capital is allocated on an annual basis as part of the

planning process

CHARACTERISTICS • All divisions and the group use the same ECM module• Capital can be re-allocated on an ad hoc basis using ECM

output• In this example, dynamic scenario analysis detects the

“Motor business in Division II” has plateaued => 5m is subsequently re-allocated to group level• Conversely, Division IV requires more capital than

forecasted and needs to increase capital (e.g. to support additional risks)• Group can then allocate 5m excess capital to Division IV

Top-down Capital Steering

Scenario-driven Capital Steering

Division IV

GroupECM

Division I

Division II

Division III

Motor Property Marine

25m 25m 25m 25m

15m 5m 5m

ECM

5m5m

5m

12

Exemplary dimensions drive a comprehensive enterprise-wide customer-centric strategy supported by Risk ManagementOverview of Risk Management adoption on selected client-centric initiatives


Improved availability of data per client (not only per product) based on Risk Management insight

Improved understanding of the customer risk profile and new demands

Increase effectiveness of channels through improved risk-based segmentation of customer groups

New products/self-service offerings based on new customer risk demands and/or profiles

Disruptive technologies allow insurers to place customers at the center of

the right activities, thus improving customer experience and satisfaction

Unique Customer View

Customer Analytics

Campaign Management

Customer-oriented Products and Services

Agenda






client centricity


Insurers


The Accenture Technology Vision 2016 outlines key trends that also drive future Finance and Risk ArchitecturesSelected Trends – Accenture Technology Vision 2016

Do things differently, do different things and create new jobs, products and servicesMachines will be the newest recruits

IT barriers have been eliminatedLooking to digital ecosystems for the next waves of change

PEOPLE FIRST: The Primacy of People in a Digital Age

Predictable Disruption

Platforms are trending, and for great reasons. New business models are adaptable, scalable and interconnected

Platform Economy

Intelligent Automation

New technologies require new talents. Liquidity takes on new meaning in the work-force: become adaptable and change-ready

LiquidWorkforce

Source: Accenture Technology Vision 2016: https://www.accenture.com/us-en/insight-technology-trends-2016.aspx

https://www.accenture.com/de-de/insight-technology-trends-2016.aspx


Insurers are in the midst of a digital revolution that is impacting most, if not all, aspects of their businessTo position themselves for success, insurers are encouraged to seize the opportunities created by emerging trends

Business model innovation

Platform Economy

Upgrade business processes

Intelligent Automation

Enhance organizational efficiency

Liquid Workforce

Long-term R&D strategy

Predictable Disruption

Pre-emptive risk mitigation

DigitalTrust

of surveyed insurers see the “Internet of Things” bringing about complete transformation or significant change in the industry

of surveyed insurers believe trust is the cornerstone of every business in the digital economy

of surveyed insurers expect platform-based business models to become part of their growth strategy in three years

of surveyed insurers agree that a more fluid workforce will improve innovation

of surveyed insurers are investing more in embedded artificial intelligence solutions

78% 83%82% 83% 85%

PEOPLE FIRST

Source: Accenture Technology Vision 2016: https://www.accenture.com/pt-en/insight-insurance-technology-vision-2016

https://www.accenture.com/de-de/insight-technology-trends-2016.aspx

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Efficiency and Innovation: From Regulatory-driven Risk Operating Models to Improved ECM and Client Centricity

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