PREPAR-VIE Gearing up for Solvency II with advanced stochastic modeling
Company Size
200-1,000
Region
- Europe
Country
- France
Product
- IBM Algo Financial Modeler
Tech Stack
- Excel
Implementation Scale
- Enterprise-wide Deployment
Impact Metrics
- Cost Savings
- Productivity Improvements
Technology Category
- Analytics & Modeling - Predictive Analytics
Applicable Industries
- Finance & Insurance
Applicable Functions
- Business Operation
Use Cases
- Regulatory Compliance Monitoring
Services
- Data Science Services
About The Customer
Established in 1984, PREPAR-VIE is the life assurance filial of BRED Banque Populaire. With annual premium income of more than EUR500M, PREPAR-VIE creates and manages savings and life insurance contracts for more than 160,000 individuals. The company needed to be ready for the Solvency II Directive that governs insurance firms in the European Union. This directive is designed to protect consumers and reduce systemic risk by setting quantitative requirements for the amount of capital each insurer must legally hold, known as the solvency capital requirement (SCR).
The Challenge
PREPAR-VIE, a life assurance filial of BRED Banque Populaire, needed to be ready for the Solvency II Directive that governs insurance firms in the European Union. This directive sets quantitative requirements for the amount of capital each insurer must legally hold, known as the solvency capital requirement (SCR). However, PREPAR-VIE lacked a formal solution for asset-liability management (ALM), making it impossible to calculate the best-estimate liability for the SCR in a timely and efficient manner. Previously, the business only needed to make provisions within a one-year horizon, which their financial systems could handle. However, to perform the stochastic projections required for Solvency II, they needed a new approach.
The Solution
To meet the requirements of the Solvency II Directive, PREPAR-VIE implemented IBM Algo Financial Modeler. The actuarial team at PREPAR-VIE built, and continues to refine, a stochastic model covering around 1,000 stress scenarios using this tool. The model takes into account the full range of possible risks and their probabilities, enabling it to determine the likely future value of assets and liabilities. PREPAR-VIE uses the IBM solution’s embedded Excel add-in to feed this output into Excel, aggregating it with estimates from other systems to prepare the best-estimate liability. This solution simplifies the whole process around Solvency II and is estimated to be 20 percent faster than a competing solution.
Operational Impact
Quantitative Benefit
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