One Grand Model for Multiple Lines of Business, Segments or Layers.
You can design one grand model for multiple lines of business that quantfies the features that are unique to your company. The model describes:
- The volatility in each line and
- The relationship between the lines
There are many benefits of using a model that includes the correlations between the lines. Understanding the amount of diversification in your business is crucial for your financial health. ICRFS-Plus™ 10 allows you to find out what your data is telling you about correlations between layers, segments, or lines of business. There are many uses for this information:
Dynamic Financial Analysis
Use probability distributions and correlations between lines of business that reflect your own business, not some "average" industry measure.
Reinsurance
If you are reinsuring a slice of your business, you need to understand the amount of correlation between the layers you retain. Is the top layer highly correlated with the bottom layer, or are they essentially independent?
Pricing
The amount of diversification may affect the price you are able to offer without undue risk. Are segments in different states, say, highly related?
Risks for Reinsurers
A reinsurer needs to understand the risks in reinsuring similar business in different companies. Are the companies related or independent?
Evaluating Mergers with Other Companies
If you are considering buying or merging with another company, an important consideration is the amount of diversification that that company offers compared to your existing business.
Your Company Versus the Industry
Each company has its own inherent volatility and each company is different to the industry. You can quickly compare the volatility and trends for your company with the industry using the warp speed modelling Wizard. If need be, you can formally credibility adjust any uncertain trend parameters for your company with those in the industry. The amount of process variability is unique to your company and so you must estimate it from your own data.
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For more information on the new benefits in ICRFS-Plus™ 10 click here.