Challenge
A prominent London Market insurer sought to place an innovative reinsurance arrangement, collateralised through financial markets. Limited data was available to calibrate the coverage, and the product features and uncertainties required clear and careful communication in order to attract potential investors. Milliman was approached by the structuring agent to assist in designing a suitable reinsurance product. We were tasked with the independent modelling of the product and producing an independent report for prospective investors.
Approach
Model build: Milliman built a model using a range of actuarial techniques to project the future balance sheet at extreme return periods over a five-year time horizon.
Hybrid modelling methodology: We combined traditional actuarial techniques with more sophisticated modelling approaches, factoring in real-time market developments. Additional consideration was given to emerging risks, such as geopolitical conflicts and inflationary uncertainties.
Multidisciplinary stakeholder engagement: We managed daily collaboration with key stakeholders, including the insurer, the structuring agent, legal advisors and various intermediaries to align key deliverables and milestones. We managed expectations around modelled results and worked with the wider project team to develop communication strategies for different audiences.
Tailored, investor-focused actuarial reporting: We produced two reports to address the needs of all stakeholders involved in the project: 1) a comprehensive technical report designed for the London Market insurer, the cedant and the structuring agent to examine the methodology and assumptions; and 2) an investor-friendly report with detailed explanations on methodology, assumptions, results, and key limitations and uncertainties, written with non-insurance experts in mind.
Impact
Accelerated product launch: Within short timescales, we delivered independent modelled results to facilitate rapid decision-making and deal structuring.
Heightened risk awareness: We sparked meaningful dialogue among all parties regarding the business’s core risks and underwriting strategy, leading to a more robust and well-informed product design.
Innovative product solution: We were part of an effective, fast-moving project team that pushed boundaries to provide a blueprint for bridging between the reinsurance and financial markets through an innovative collateralised reinsurance solution.