ING Central and Rest of Europe finds flexible solutions for financial modelling

Published on 07-Jan-2013

"The flexibility, performance and control that Algo Financial Modeler Enterprise provides for our business are crucial to our ability to meet new challenges, such as Solvency II. With technical support from IBM, we have been able to adopt this leading-edge solution with a high degree of success." - Frederick Lathioor, Manager, Regional Actuarial Services, ING Central and Rest of Europe

Customer:
ING Central and Rest of Europe

Industry:
Insurance

Deployment country:
Hungary

Solution:
Algorithmics Solutions, BA - Business Analytics, BA - Risk Analytics

Overview

ING’s insurance division in Central and Rest of Europe consists of a number of business units that utilise some shared services. Since 2007, a central cashflow modelling team based in Hungary has provided cashflow modelling services for the whole region.

Business need:
To meet new requirements such as Solvency II, ING Insurance Central and Rest of Europe needed to replace its existing liability modelling software with a solution that could support sophisticated stochastic techniques.

Solution:
ING implemented IBM® Algo Financial Modeler® Foundation and Algo Financial Modeler Enterprise, which provides a controlled, flexible environment for creating and deploying complex insurance liability models. Stochastic modelling capabilities enable users to model cash flows more accurately by analysing thousands of possible scenarios.

Benefits:
Provides a single cash flow modelling environment capable of supporting many different business areas: for example, Solvency II cash flows and many others. Improves control of the cash flow modelling environment, with separation of development and production environments, version control and change management capabilities that will help to meet Solvency II requirements. Broadens access to models and results for business users, enabling them to start runs and analyse results and data in a controlled, locked-down environment.

Case Study

ING is a global financial institution of Dutch origin, currently offering banking, investments, life insurance and retirement services to meet the needs of a broad customer base. As of 2012, it employs approximately 93,000 people and serves 66 million private, corporate and institutional customers in over 40 countries around the world.

ING’s insurance division in Central and Rest of Europe consists of a number of business units that utilise some shared services. Since 2007, a central cashflow modelling team based in Hungary has provided cashflow modelling services for the whole region.

Frederick Lathioor, Manager, Regional Actuarial Services for ING Central and Rest of Europe, comments: “The business realised that its cashflow analysis requirements were becoming more rigorous, and it made sense to centralise this function. And if we were going to create a central modelling team, it made sense to use a single modelling platform as well.”

Finding the right platform

Most of the local ING teams had been using a legacy actuarial modelling tool, but the new central team decided to evaluate a number of other software packages and select the best solution for their current and future needs.

“We were moving from a traditional approach for valuations towards using market-consistent embedded value [MCEV] calculations,” explains Frederick Lathioor. “MCEV relies on the ability to estimate the effects of multiple risk-neutral economic scenarios by using stochastic models and running them hundreds or even thousands of times to obtain a reasonable understanding of the underlying risks and value. Our existing solution was not designed for stochastic modelling – and in fact, very few products on the market at that time could offer the capabilities we needed. In this respect, IBM Algo Financial Modeler Foundation seemed to be ahead of the competition.”

Adopting a leading-edge solution

ING initially adopted Algo Financial Modeler Foundation, a desktop application that gave its modelling team the ability to design sophisticated stochastic models. After using this solution successfully for several years, the team became one of the first companies in the world to upgrade to Algo Financial Modeler Enterprise.

“With Solvency II on the horizon, we did a full internal audit of our systems, and realised that we needed to further increase the governance structures around our modelling environment,” says Frederick Lathioor. “Solvency II requires absolutely water-tight control of the data and models that are used in its calculations, so we needed a solution that could provide rigorous change management and a full audit trail. Algo Financial Modeler Enterprise gave us the ability to fully separate the development and production environments for our models, and a comprehensive governance structure for overseeing them.”

Highly efficient analytical engine

“Some of the calculations we perform are enormously complex. We might need to do 5,000 iterations on more than a million records to cover all the required scenarios,” comments Frederick Lathioor. “This is beyond the capabilities of a normal server, so we need to run these large-scale calculations on a high-performance scalable computing cluster in Amsterdam (outsourced to a third party). The cluster is an expensive resource, so it’s important to utilise it efficiently. One of the big advantages of Algo Financial Modeler is that it only calculates the values that we ask for – so we don’t occupy the cluster unnecessarily, and we can still obtain the data that we need.”

The solution’s ability to optimise performance is particularly important as the frequency of reporting continues to increase. It is likely that ING will have to move from a quarterly to a monthly reporting cycle, in response to heightened regulatory requirements and a greater desire for transparency throughout the business.

“The flexibility, performance and control that Algo Financial Modeler Enterprise provides for our business are crucial to our ability to meet new challenges, such as Solvency II,” concludes Frederick Lathioor. “With technical support from IBM, we have been able to adopt this leading-edge solution with a high degree of success.”

About IBM Business Analytics

IBM Business Analytics software delivers data-driven insights that help organisations work smarter and outperform their peers. This comprehensive portfolio includes solutions for business intelligence, predictive analytics and decision management, performance management, and risk management.

Business Analytics solutions enable companies to identify and visualise trends and patterns in areas, such as customer analytics, that can have a profound effect on business performance. They can compare scenarios, anticipate potential threats and opportunities, better plan, budget and forecast resources, balance risks against expected returns and work to meet regulatory requirements. By making analytics widely available, organisations can align tactical and strategic decision-making to achieve business goals.

For more information

For further information please visit ibm.com/business-analytics

Products and services used

IBM products and services that were used in this case study.

Software:
Algo Financial Modeler

Legal Information

© Copyright IBM Corporation 2012. IBM Magyarországi Kft., H-1117 Budapest, Infopark, Neumann János u. 1., Magyarország. Produced in Hungary. December 2012. IBM, the IBM logo and ibm.com are trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. Other product and service names might be trademarks of IBM or other companies. A current list of IBM trademarks is available on the web at: www.ibm.com/legal/copytrade.shtml. Algo and Algo Financial Modeler are trademarks or registered trademarks of Algorithmics, an IBM Company. This document is current as of the initial date of publication and may be changed by IBM at any time. Not all offerings are available in every country in which IBM operates. The client examples cited are presented for illustrative purposes only. Actual performance results may vary depending on specific configurations and operating conditions. THE INFORMATION IN THIS DOCUMENT IS PROVIDED “AS IS” WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND ANY WARRANTY OR CONDITION OF NON-INFRINGEMENT. IBM products are warranted according to the terms and conditions of the agreements under which they are provided. The client is responsible for ensuring compliance with laws and regulations applicable to it. IBM does not provide legal advice or represent or warrant that its services or products will ensure that the client is in compliance with any law or regulation.