Evaluating strategic underwriting options from a financial perspective
Date | 16 Sep - 05 Dec 2022 |
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Virtual training course | Online Click to open location details |
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Time zone | US/Latam and EMEA friendly time zone |
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Further Information
Key benefits
- Gain a deeper understanding of the relationship between underwriting and investment decisions and financial performance.
- Develop your knowledge of risk and solvency capital requirements and use this to be able to evaluate alternative capital management strategies.
- Become more efficient in the use of Excel and building best practice financial models to facilitate effective decision making.
Target group
Anyone who is interested in understanding the financial dynamics of an insurance company. While the focus of the course will be underwriting it will also cover the investment and capital management sides of the business so it will be of interest to people from all parts of the business.
Training methodology
The course is designed in a blended learning format, and comprises of three elements:
- A number of recorded videos (about 12 hours), that enable you to build a financial model in Excel yourself
- Work in learning support groups that enable you to analyse different market scenarios and discuss outcomes in your groups
- A series of regular live virtual sessions during the programme where the group will meet up to discuss the strategic implications of what you have learned.
Important note:
We highly recommend you build the Excel model yourself.
The process of building a model develops the understanding of each topic and also enables you to use the model to evaluate the impact of different strategic alternatives, for example pricing strategies, product mix, investment strategies and the role of reinsurance in capital management.
Requirements
While no finance knowledge is assumed some prior understanding of finance will help.
It is assumed that participants are familiar with Microsoft Excel. While the specific Excel skills required will be covered during the course, it will be expected that participants already have an understanding of how Excel works and have used it previously.
Dates
Set-up session
Friday 2 September 2022, 15:00 – 16:00 CEST
Training sessions
Friday, 16 September 2022, 15:00 - 17:00 CEST,
Monday, 3 October 2022, 15:00 – 19:00 CEST,
Monday, 31 October 2022, 15:00 – 19:00 CET,
Wednesday, 23 November 2022, 15:00 – 19:00 CET,
Monday, 5 December 2022, 15:00 – 19:00 CET,
US/Latam and EMEA friendly time zone
Disclaimer
The event may be photographed, videotaped, filmed and /or digitally recorded. You consent to Swiss Re's use, free of charge, of any memorialization of the event in which you may appear for any Swiss Re publication or promotional purpose.
Further Information
Agenda
Tech check and programme overview
Friday, 2 September 2022, 07:00 – 08:00 CEST
We do a quick tech check with all participants and present the programme overview and answer any questions you may have.
16 September 2022: Module one
In this module, we will introduce our course facilitators and explain the course format. You will get to know your fellow participants and we will create learning groups.
The course will use Excel as a tool for enabling participants to develop a greater understanding of the strategic underwriting issues faced by insurers. While the necessary Excel skills will be covered in each module as appropriate this first session gives some fundamental tips on using Excel efficiently.
03 October 2022: Module two
In this module, we will cover three areas: Accounting fundamentals, underwriting profitability and underwriting risk.
Accounting
Since the course will be looking at the role of underwriting from a strategic basis, we will see how the three key areas of underwriting, investment and capital management influence financial performance.
Underwriting profitability
Underwriting is the core component of any insurance business. We explain how underwriting profitability is calculated, by focusing on the difference between underwriting and accounting years and how a nominal claims reserve schedule can be converted to a discounted reserve statement.
Underwriting risk
Underwriting profit reflects a best estimate of the underwriting performance. However, there is significant uncertainty about the actual outcome. Therefore, an insurance company needs to hold capital to ensure it can pay its claims even if they are higher than expected. We use the Solvency II methodology to calculate the amount of capital required to cover underwriting risk.
Analysing underwriting performance
Having built a model which calculates underwriting profitability and capital required, we apply a number of key ratios to identify the risk adjusted return from underwriting and the drivers available to improve it.
31 October 2022: Module three
In this module, we focus on the impact of reinsurance on accounting, underwriting profitability, and underwriting Solvency Capital Required.
Review of key reinsurance products
We briefly revisit the major reinsurance products, how they are structured and priced.
Having seen how underwriting activities absorb capacity, we assess how reinsurance releases capacity by taking away risk. We show why some reinsurance structures are much more capital efficient than others and how reinsurance affects regulatory capital requirements.
Impact of reinsurance on underwriting performance
Reinsurance affects both underwriting profit and underwriting risk and capital required and we assess its effect on both and calculate the true financial cost of a reinsurance solution.
Evaluating the effectiveness of different reinsurance solutions
We use the model to evaluate the cost of different reinsurance structures and different reinsurance providers.
23 November 2022: Module four
The second core component of an insurance business is investment. A company needs to decide how much to invest, where to invest and what returns it expects to generate from the different asset classes. As investments tie up capital, we also need to consider the capital required, known as market risk.
Investment returns
We describe the main asset classes and how to forecast the returns available from each asset class.
Investment risk (Market risk)
Forecast investment returns are a best estimate and subject to a high degree of uncertainty. The risk of investment losses means an insurance company needs to hold additional capital to protect itself in the event of a market downturn. We identify how much capital is required to cover this risk as calculated under Solvency II.
Risk budgeting – combining underwriting and market risk
An insurance company has a given amount of capital which it can use to support risk. It needs to decide whether to allocate this to investment or underwriting activities. In order to do this effectively it needs to assess the impact of each investment strategy on underwriting capacity and profitability.
Analysing investment performance
Having built a model which calculates investment returns and capital required, this session shows how to calculate key ratios to identify the risk adjusted return from investment activities.
5 December 2022: Module five
Having modelled underwriting risk, default risk and market risk we are able to calculate the total capital required for an insurer.
Developing an effective capital management strategy
The company then has to decide what solvency ratio it is comfortable with and the optimal mix of equity, subordinated debt and reinsurance to achieve its solvency target.
Completing a fully integrated financial model of an insurance company
As a last step we bring all the pieces together to provide an integrated financial model of all the individual elements.
We will be setting and evaluating corporate financial targets and develop a value creation tree to visualise the interaction between the risk adjusted return and solvency ratio.
Combining underwriting and investment performance to analyse risk adjusted returns and analysing the sensitivity of value created to different value drivers will complete this comprehensive course.