ALPS Analytical Functionality

Core to the ALPS analytical functionality is the definition of subject, which is the scope of the original policy placement, for example in:

• Aviation it is the airline
• Financial institutions it is the financial services company
• General Casualty is the major corporate
• Marine it is the ship owner
• Energy it is the rig
• Space it is the satellite

Banded aggregate analysis

The banded aggregate analysis shows the gross portfolio loss (the loss from all policies and contracts underwritten in the portfolio) for each subject at user defined market loss levels.

Impact analysis

The impact analysis shows the gross portfolio loss for a market level event (or events) for scenarios involving a number of questionnaire subjects.

Both banded aggregate reports and impact analysis can be done gross or net of inwards reinstatement premium.

To perform the ALPS Pricing and Portfolio Modelling detailed below, the user needs an event table to run the analysis. The event table can contain any losses provided the format is consistent, and can be historical losses, modified historical losses, or simulated. ALPS is able to store a number of different event tables to enable analyses to be performed on different bases using different sets of assumptions.

Users have the option of using their own event tables or of using the ALPS Loss Simulation engine to generate a stochastic set of losses. The ALPS Loss Simulation engine combines industry third party data with user defined parameters to generate the losses, and is the only component within ALPS that varies by line of business.

ALPS ensures a consistent approach to the pricing of direct, treaty reinsurance or retrocession programmes. Deal pricing is performed against an event set that is either user defined or generated by the ALPS Simulation engine and delivers the following statistics: -

Portfolio Analysis

By simultaneously processing the losses in the event table through the entire portfolio ALPS can provide the user with empirical distributions of gross portfolio losses (annual aggregate and per event) and a number of summary statistics (including expected portfolio mean and ruin loss, capital required, standard deviation and loss percentiles). This information can be used for business planning and reserving purposes, and for further actuarial analysis at the group level.

Capital allocation and return on equity calculations

Utilising the statistics from the portfolio analysis, ALPS can be used for group capital allocation purposes and can provide a portfolio return on equity calculation based on RAROC methodology.

Outwards reinsurance pricing

Once a distribution of gross losses has been established for the portfolio, on a per event and annual aggregate basis, outwards reinsurance programmes can be accurately analysed and a purchasing strategy devised to maximise results and return on equity. Once a reinsurance programme has been purchased the above portfolio analysis can be run on a net basis.