Improving systems to improve insurance model risk management performance
Overview
Developing and utilizing an effective MRM system will promote better insurance MRM performance. A basic MRM system should provide a platform for managing MRM activities, in particular tracking and managing validations. As insurers accumulate information about their models through scoring and validation processes, we believe that they can enhance their systems to gain beneficial insight across their model inventory, especially commonality of components and interactions between models.
Based on recent client work and recent insurance industry surveys, we share some thoughts on the key characteristics of an effective base platform, cross-inventory opportunities, and how risk managers can enhance MRM processes and systems to take advantage of these opportunities.
Standardization and consistency
As validations and model risk management activities populate the MRM system, insurers should use that information to standardize model documentation formats and develop consistent terminology. Model and validation documentation should reference upstream and downstream models using the system’s identifiers.
Insurers can then mine the more fulsome information contained in their MRM system to:
- Ensure consistency where required,
- Eliminate duplicative validation tasks and,
- Map their model web, eliminating unused models, improving models that need updating, and carefully nurturing and managing the models that are of greatest value to the organization’s success.
How PwC can help
Our insurance risk and capital management practice advises insurers on assessing, monitoring and managing risks from all sources. Multi-disciplinary teams provide comprehensive services in all key risk areas:
- Actuarial
- Financial
- Operational
- Regulatory and compliance
PwC’s professionals also address risk management framework components, including strategy, governance and organization, measurement and analytics, reporting, and systems and data infrastructure.
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