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Actuarial modeling

Insurance is a dynamic industry that demands continuous assessment of new and changing risks as well as the application of new regulation and financial reporting standards. Requirements such as IFRS 17, long-duration targeted improvements (LDTI), and other financial disclosures generate exponential growth in modeling complexity and volume. Increased efficiency and reliability in actuarial modeling are essential to meet reporting deadlines and governance standards.

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Supporting critical management functions

01 Actuarial

Actuarial

Moody's provides insights to drive reporting and decision-making across the business, helping with pricing, reserving, asset liability modeling (ALM), financial projections of earnings and capital, capital calculations, hedging, and financial and regulatory reporting.

Our solutions help customers assess group-wide economic and regulatory capital, develop capital management strategies, and price complex embedded guarantees and options. These capabilities are fully transparent and documented.

02 Investment

Investment

Moody's models invested assets to help create an integrated investment value chain. This helps create optimal portfolios that reflect an insurer's liabilities, capital, regulatory regime, and objectives.

This allows our customers to build robust, transparent, and quantitatively assessed strategic asset allocations and multi-asset investment strategies that are well understood and scrutinized in the context of a company’s liability profiles.

03 Finance

Finance

Combining actuarial and accounting expertise, we support financial planning, capital budgeting, and regulatory reporting. Our tools assist with measurement, accounting, disclosures, custom analysis, and data management for insurers' general ledgers.

Moody's supports advanced accounting frameworks such as IFRS 9, IFRS 17 and LDTI.

04 Risk

Risk

Bringing together market risk, granular credit risk, physical and transition risks, mortality and longevity risks and more risk types offers insurers a deeper understanding and a more integrated approach to assess and manage risks consistently across a range of business functions. 

Our tools help with the preparation of regulatory assessments, including the Own Risk and Solvency Assessment (ORSA). It supports the assessment of risk exposure and how it evolves over time under different stress conditions and whether risk appetite limits have been breached.

Capabilities

Moody’s AXIS™ actuarial system is a powerful modeling solution used by insurers, reinsurers, and consultants for actuarial analysis of life insurance and annuity business.

With more than 30 years’ experience in the life insurance market and a service model tested and valued by a broad, global community of customers, we are a leading global provider of actuarial modeling solutions.

01 Pricing and product development

Pricing and product development

The AXIS system supports the initial design and development of new life insurance and annuity products or the redesign of existing products by:

  • Specifying detailed issue age- and risk class-specific product features by generating or importing product values

  • Exploring distribution compensation options including commission and bonus structures
     

  • Defining applicable reserve methods and assumptions for multiple valuation purposes
     

  • Defining regulatory or internal required capital targets
     

  • Defining expected taxation rates and assumptions
     

  • Simulating sales illustrations using projected premiums and benefits
     

  • Projecting resulting earnings on multiple bases

  • Calculating profitability and return on capital metrics
     

  • Solving for target values of any of the above by making iterative adjustments

02 Liability valuation

Liability valuation

Based on full seriatim in-force business data files for a single valuation date, the AXIS system can transform and allocate policy data to AXIS model definition and control objects created by the user, and calculate up to eight independent reserve calculations in a single run, including:

  • Local statutory reserve calculations
     

  • Solvency II best estimate liability calculations
     

  • Tax reserves specified by tax authority
     

  • Public reporting on local or international standards (such as US GAAP and IFRS)
     

  • Economic balance sheets
     

  • Embedded values reflecting anticipated release of future profits
     

  • The value of options and guarantees using stochastic methods
     

  • Capital requirements

     

The AXIS system can also accept multiple in-force business files and multiple assumption bases, trace business and reserve movements through the current reporting period, and generate detailed granular data files needed to support advanced accounting frameworks such as IFRS 17 and US GAAP LDTI.

03 Asset allocation and investment

Asset allocation and investment

The AXIS solution can import data files of investments in force at a starting date and then generate the following financial projection details on a monthly, quarterly, or annual basis for up to 100 years:

  • Detailed cash flows such as bond coupons, mortgage and rental payments, dividends, capital repayments, and administration fees and expenses

  • Asset movements arising from maturities, defaults, sales, prepayments, and calls
     

  • Earnings and income statement details such as earned income, amortization of realized and unrealized gains and losses (including interest maintenance reserve and asset valuation reserve), amortization of premium and discount, and gains and losses on defaults
     

  • Balance sheet values and in-force statistics, including par values, book values, market values, accrued income, C1 required surplus, and so on
     

  • Multiple asset accounting bases

     

The AXIS system links to the Moody's structured cash flow engine for modeling structured finance assets such as residential mortgage-backed securities, commercial mortgage-backed securities, asset-backed securities, or collateralized mortgage/debt/loan obligations.

04 Risk and capital

Risk and capital

The AXIS system supports financial reporting requirements for a vast array of purposes and regulatory risk-based capital calculations (Solvency II, C-ROSS, NAIC, Hong Kong RBC). This offers a complete and seamless integration of modeling functionality that can be applied to a single policy, product, or product group; a line of business; or entity level.

The AXIS system models in-force portfolios and new business sales plans, which are necessary for calculating various global capital frameworks and their projection over time.

Where stochastic calculations are needed, the AXIS system can handle them at time zero and nested into projections at multiple levels.

05 Earnings and performance analysis

Earnings and performance analysis

Based on the starting valuation of a detailed seriatim portfolio of in-force business and actual experience assumptions for investments, mortality, lapses, and expenses, the AXIS system can be used for:

  • Analyzing the impact of margins with reserves by assumption
     

  • Movement analysis reports (policy count, sums insured, reserves, and more) on a planned or actual basis
     

  • Source of earnings analysis of the projected and actual earnings by the major sources of profit (also called gain and loss analysis) for a product line or line of business, including the analysis reserve change and earnings by individual assumption
     

  • Experience analysis of actual experience versus expected experience or exposure rates on a chosen assumption, such as mortality or lapse, for purposes of assumption refinement

06 Business planning

Business planning

Robust actuarial modeling drives key business functions of profitability analysis and business and capital planning. Asset, liability, and capital calculations for current reporting are the foundation for projected financials on multiple bases for up to 100 years. Assets and liabilities dynamically interact based on the economic scenario path and chosen reinvestment strategies.

Informed profitability and earnings analysis requires flexibility by product and company practice in addition to the calculation of the following metrics:

  • Detailed cash flows such as bond coupons, mortgage and rental payments, dividends, capital repayments, administration fees, and expenses

  • Economic basis (cash flow)
     

  • Earnings (stat, GAAP, internal)
     

  • Return on equity and return on investment (impact on free surplus)
     

  • Embedded value

  • Value at risk and conditional tail expectation
     

  • Company-specific formulas

     

Profitability analysis and business planning also require sensitivity analysis and stress testing capabilities (“what if?” analysis), which demand agility, performance, quality, and dynamic asset liability interaction.

07 Stress testing and ORSA

Stress testing and ORSA

Stress testing is fundamental to ORSA or the regional equivalent and can be applied at the company level or to pricing and planning decisions at product or product line levels. Moody’s gives you the ability to test deterministic scenarios of single or multiple interacting stress events or trends in economic and experience assumptions.

The AXIS actuarial models allow for the definition and application of a wide variety of stress scenarios. Consistently apply the specified stress test to books of business, investment portfolios, and insurance operations to demonstrate its impact on profit metrics, earnings, and capital ratios. Reverse stress testing can be used to estimate the required deterioration in each assumption to hit a defined impact on any of these measures through an automatic iterative process. Stresses can be combined with management actions including reinsurance, repricing, investment strategies, and hedging or sales plan adjustments to provide management with a realistic and comprehensive narrative.

AXIS™ Actuarial System 

Moody’s AXIS™ Actuarial System offers an integrated, low-code solution. Models can be built once and used for multiple purposes, accessing large-scale cloud computing power on demand.

Download brochure (English)
Download brochure (German)
Download brochure (Spanish)

Key features of the AXIS system

Fully maintained

Developed by experts, flexible where you need it to be and tailored to meet users’ needs while keeping costs down

Single integrated platform

A comprehensive modeling system for the main actuarial tasks, which can be applied to all products

Local expert support

On-demand actuarial and technical support across the globe; training and documentation provided

Technology integration

Full integration for controlled access, workflow management, automation, and fast job execution

A controlled enterprise environment

Separately installed modules are available to establish a centralized enterprise modeling environment and manage the use of grid and cloud-based infrastructures.

GridLink-as-a-Service (GlaaS)

A powerful and convenient option for the fast and economical execution of critical AXIS applications. GlaaS is a fully automated service that lets you submit AXIS actuarial modeling jobs to a cloud-based infrastructure for processing.

  • Cost-effective, pay per use

  • No upfront fees

  • Pre-paid blocks of core hours available for regular use
     


Download brochure: English | Spanish | German

Big data. Information concept. 3D render

AXIS EnterpriseLink

Server-based model management platform that provides a secure and high-performance enterprise level environment for AXIS model development, testing and processing.  

AXIS GridLink

A grid solution managing the processor farms used in the distributed processing of AXIS batch calculation runs. It offers a comprehensive set of tools that help you create and manage an efficient and secure production, development or testing environment.

Case studies

case study
Seguros RGA selects Moody's for IFRS 17
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case study
Funde Sino Life selected the AXIS solution to automate, standardize, and improve its models and processes to be ready for IFRS 17
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News and views

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Sep 01, 2023

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The importance of granular risk-integrated analysis: two case studies

In this paper we demonstrate the importance of granular portfolio risk-integrated modeling framework through two case studies.

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Scenario analysis for the insurance sector

The industry is still in the early stages of its physical and transition risk scenario development, and it has become a priority for many insurers to start understanding and developing best practices. But where do you start?

Our podcast series explains physical and transition risk scenario modeling, the different approaches you can take, and developing regulations.

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Mar 01, 2022

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Using machine learning in actuarial modeling to improve model efficiency through better clustering

Artificial intelligence (AI) and machine learning in particular are increasingly becoming popular and important components of an actuary’s toolkit. As actuaries gain access to more data, these tools can allow them to extract more insight.

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Mar 01, 2022

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Integrating scenario generation and actuarial models to accelerate the modeling process

This paper sets out how Moody’s has integrated our scenario generation and actuarial modeling tools to deliver a solution that allows insurers to run both models without the need for manual intervention or file conversions. This reduces the operational risk that insurers are otherwise exposed to as well as the overall run time of the modeling process, thus increasing the modeling team’s efficiency and flexibility.

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Mar 01, 2022

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Preparing for IFRS 17, is your actuarial system ready?

This paper presents the software-related challenges that arise from integrating actuarial and accounting systems as part of the transition from IFRS 4 to the IFRS 17.

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Jan 01, 2021

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Cashflow matching with granular credit assets

A key part of insurance asset and liability management is the choice of assets to support the long-dated liabilities.  This paper uses the example of direct cashflow matching to demonstrate the importance of granular credit modeling in determining the efficacy of these asset selection strategies.

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Jan 01, 2021

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Granular portfolio dynamics: the importance of joint credit-market risk modeling

In this paper we show the importance of jointly modeling market an credit risks for analyzing asset portfolio dynamics.

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Actuarial Modeling

SOC for service organizations

Moody’s has received System and Organization Controls (SOC 1 Type 2 and SOC 2 Type 2) reports for RiskIntegrity™ for IFRS 17, RiskIntegrity™ Insight, AXIS GridLink-as-a-Service, and Scenario Generator Cloud Burst solutions. 

SOC reports provide independent attestation of security controls and operating effectiveness.

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