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Using Hybrid Modeling in Complex Annuities for Insurance Companies

The 10th annual Equity-Based Insurance Guarantees conference took place on Nov 17-18 in Chicago. Over 200 senior risk managers and actuaries from leading life insurance companies gathered to discuss how to better quantify, monitor and manage the complex risks underlying variable annuity (VA) and fixed indexed annuity (FIA) products.

Equity-based guarantee products (VAs, FIAs, etc.) in North America currently exceed a trillion dollars in deposits. Policyholders’ investment knowledge continues to increase and has led to a record level of innovative and complex investment-related products, and it is not showing any signs of slowing down. To remain competitive in this dynamic investment product landscape and retain their market share, insurance companies need to stay up-to-date on evolving securities, accounting and tax regulations, along with policyholders’ risk appetites to develop new forms of guarantees. Given the intermingled risks underlying these products, many direct writers end up taking significant financial market-related risks without fully realizing the long-term impact of these risks on their balance sheet and shareholder value. As a consequence, insurance companies are beginning to realize and appreciate the magnitude of exposures and cut back on existing guarantees as part of a risk-management strategy.

To help insurers meet the demand to quickly develop, price, and value complex new products, as well as manage the risk, Russell Goyder PhD, Director of Quantitative Research & Development at FINCAD, gave a presentation on State-of-the-art Hybrid Modeling for Fixed Indexed Annuities and Variable Annuities. He reviewed how modern enterprise valuation and risk frameworks are efficiently and accurately solving customized hybrid modeling challenges.

About the author

Rob Garfield's picture

Rob Garfield

Head of Product Marketing and Corporate Communications, FINCAD

A key member of FINCAD's marketing team, Rob is responsible for product and content marketing , messaging, sales enablement, market intelligence and corporate communications. Rob has deep marketing and business development experience in financial information and technology,and prior to joining FINCAD, was Global Head of Equities Marketing at Thomson Reuters. Rob has also held senior marketing and product roles at SunGard, NYMEX, and earlier in his career, traded energy derivatives at Morgan Stanley.

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