Paul Waters, head of digital wealth at Hymans Robertson, explains how the consultancy is helping insurers deal with climate risk challenges, as well as the continuing impact of Covid-19 on mortality and longevity
How do you expect insurers' use of actuarial modelling to change in the coming years?
Climate change is a key focus for our clients, reflecting its prominence as the single biggest long-term issue facing society. Through our climate change scenario modelling and consulting we have enabled clients to develop their responsible investment strategies and reporting, and set off on a path to net zero.
We have helped three large life insurers significantly advance their responsible investment strategies in 2021. This involved advising them on improvements to their investment policies. We made a huge difference by helping our clients overcome issues with accessing key data and aggregating this into information packs.
Our climate change survey has also enabled participants to compare themselves with their peers and prioritise the areas they want to develop, in order to deliver the changes their customers want.
What have been Hymans Robertson's key achievements over the past year and why?
One of our exciting achievements this year has been helping our clients to move forward with innovations in decumulation products. As pension freedoms are now more embedded, we are working with clients who have a growing interest in looking for alternatives to the traditional product range and are developing annuity variants and other types of longevity pooling vehicles. We look forward to seeing this type of innovation coming to market over the next year.
We have also been busy helping our clients to grow their businesses in their existing markets and to successfully enter new ones. This has helped us to expand our own insurance and financial services practice to 50 consultants.
What areas of expertise does Hymans Robertson offer insurers with actuarial modelling?
Our dedicated team of insurance consultants provide targeted insurance advice in areas including risk and capital optimisation, longevity, investment strategy and product development. This work is supported by robust actuarial modelling, which is underpinned by Club Vita's data and our in-house Economic Scenario Service (ESS).
Club Vita has the UK's richest longevity dataset that enables postcode-level understanding of an individual's life expectancy to assist with tailored retirement planning. Our ESS provides stochastic modelling of the potential investment paths to give a robust analysis of the outcomes, which can be more insightful than traditional deterministic modelling.
How does Hymans Robertson plan to innovate in the actuarial modelling space?
The individual retirement market is an area where we are having a big impact. We are bringing together a broad team of experts in pensions, insurance and digital solutions to provide innovative tools to retirement providers. These tools leverage our economic scenario modelling alongside Club Vita longevity analytics to meet our clients' technology needs and, in turn, help people make better retirement decisions.
Has the pandemic changed insurers' use of actuarial modelling?
One of the biggest challenges from the pandemic for insurers is allowing for the continuing impact of Covid-19 on mortality and longevity.
In our internal model calibration and validation work, performed for five clients this year, we have ensured an appropriate level of scrutiny regarding future risks, such as Covid-19 and climate.
Understanding these forward-looking risks and how they will impact the balance sheet is crucial to ensure these models have a degree of future-proofing.
Our 2021 longevity benchmarking survey, in which a record 29 re/insurers participated, enabled our clients to understand how their firm's experience compares with their peers. It also prompted them to consider possible approaches to handling 2020 data, and to make an allowance for the pandemic's long-term impact.
Overall, our focus continues to be on the longer-term impact of the pandemic on mortality and longevity.
We have developed a framework to estimate the impact of the various drivers of change on life expectancy resulting from the pandemic, and delivered updates on this.
This analysis has enabled our clients to have more confidence in their assumption setting and wider business decisions.