CCR World Magazine


You are here  :Home arrow News arrow Alesco Determines Optimum Risk Financing and Insurance Strategies with Palisade’s Risk Software
Contact Us Newsletter Signup RSS Feeds

Latest News Headlines

Headlines

 
Commercial Credit News

Headlines

 
Alesco Determines Optimum Risk Financing and Insurance Strategies with Palisade’s Risk Software Print E-mail
Thursday, 16 April 2015

Alesco Risk Management Services (Alesco), uses Palisade’s risk analysis tool @RISK in its approach to optimising insurance spend and identifying alternative future strategies for the financing and transfer of key risks. This helps its clients in the global energy industry develop informed risk management tactics and delivers significant value to all aspects of the business.

Alesco uses @RISK from Palisade to design models that forecast future insurance losses. This enables alternative insurance structures to be tested to see how different balances of business unit retention (usually a simple deductible or excess on the policy that will be applied before any insurance claims is made), captive retention and, beyond that, commercial insurance, affect premium levels and capital requirements. The objective is to find the optimal structure that balances an acceptable premium cost with the client’s financial ability to retain risk, and its appetite to do so.
 
Having first worked with the client to undertake a detailed loss forecasting exercise, the next step is to determine how much risk a client should retain with its captive. Alesco fits statistical models to historical loss data, obtained from both the specific client and wider industry data (as above). @RISK is used for Monte Carlo simulation, with the output being graphs that show the projected long-run average retained loss cost for the client (captive) and the volatility around this average (the 95th percentile or worst year in 20 position, for example). Both the average level of future losses and the variation around this average can be estimated.
 
These results are applied through the captive’s financial statements to see the effect alternative reinsurance structures have on premium levels and capital requirements over the next three to five years.
 
This enables Alesco to advise the client on the optimal insurance and reinsurance programme structure taking into account the premium to pay, and potential cost savings, as well as the organisation’s risk appetite. Alternatively, a client might review its current reinsurance programme ahead of its renewal to evaluate whether it had sufficient capital to increase their retention levels, ultimately reducing their external premium spend.
 
“The introduction of regulation such as Solvency 2 and other ‘risk based’ capital approaches generally requires this type of risk modelling to validate and support capitalisation levels,” explains Derek Thrumble, Partner at Alesco. “Palisade’s @RISK makes it quick and simple to run Monte Carlo simulations directly in Excel, thereby avoiding the need to build complex models with thousands of rows of data and code. As a result we can undertake complex forecasting for our clients within a realistic time-frame to influence decisions that meets their corporate, financial and legal requirements and determines the insurance strategy that is the best fit for them at that time.”

(Source - Alesco Press Release)
 

 

The CCR World App

 

Read CCR World as an App on your iPad or iPhone.
Simply click on this link (opens iTunes as an external link) to see the CCR World iTunes Preview and download to receive a free two-week trial or go to iTunes or the App Store and search for "CCR World".

CCR Magazine


Want to know more about the UK credit scene? Then take a look at our sister magazine, CCR, the leading UK publication for senior credit industry executives.

Find out more

CCR World newswire

Sign up to our E-Newsletter and E-Alerts.

subscribe

Read The Magazine - FREE ONLINE!

CCR World is the premier magazine for consumer and commercial credit professionals. It provides an independent voice to the global industry, breaking news stories and running in-depth features.

It is FREE to read online, so click here to read the current edition online.

(If you have not registered already, you will just need to do so to read all the news and analysis).

GTS Media Ltd
81 Cambridge Road
Southend-on-Sea
Essex
SS1 1EP

Registered in England No: 05483197