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Insurance Markets

Insurers are under constant pressure--pressure to reduce the time-to-market for new products and to introduce new features that decrease risk; pressure to comply with government regulations; pressure to do more with less time. But compute resources haven’t kept pace with the demand.

In the past, reserves and risk-based capital could be calculated using deterministic formulas. With the industry moving towards principal-based reserves, companies are using stochastic methods for pricing and analysis. Stochastic methods combine probability and the interpretation of quantitative data. Many of these calculations iterate through thousands of scenarios and tens of thousands of policies, over a 30 year lifetime. This exponentially increases the amount of computing capacity necessary to perform these jobs. In many cases actuaries model these projections in Microsoft Excel. Desktops simply can’t keep up. Even with the latest multi-core technology and maximum memory allowed, a single pass through a complex scenario on a desktop computer can force a spreadsheet to run, at best, overnight and, at worst, for multiple days before completing on a single desktop machine. The ability to perform these projections within regulated timeframes is a huge challenge.

Challenges

  • The types of analysis and the number of stochastic scenarios an actuary can perform are limited by the desktop computing.

  • Actuaries need to run multiple iterations a day, not multiple iterations a month.

  • Using more modern methods of probability and interpretation of quantitative data while at the same time meeting government regulated timeframes are in conflict.

Benefits

With more computing power at their fingertips, actuaries can now run model projections in a fraction of the time it used to take. This means they are able to do more stochastic scenarios, sophisticated analysis and other types of modeling better, more efficiently and well within compliance regulated timeframes.

  • Improved Competitiveness: A company can bring sophisticated products to market in real time, with better understanding of the associated risks allowing them a greater ability to compete.

  • Better Measures of Success: Many companies are turning to economic capital, as opposed to regulatory capital as a means for measuring success. This provides a superior understanding of owner’s equity, retained earnings and subordinated debt.

  • Compliance: Having to meet the deadlines for reserve and risk-based capital takes more time. Using High Performance Computing allows the use of stochastic projections, and in some cases, nested stochastic projections while achieving mandated timelines.

  • Integration with Microsoft Office: Excel is the most used front-end tool in the financial industry. By combining Excel with Microsoft Windows HPC Server 2008, you can bridge the desktop and HPC computing environments within a well-integrated end-user experience. Microsoft HPC makes it possible to distribute Excel calculations across a set of compute nodes providing an order-of-magnitude improvement in performance.

Solution Components

  • Microsoft Windows HPC Server 2008: Windows HPC Server 2008 provides a secure, cost-effective solution that allows analysts to spend more time analyzing complex data sets to make better decisions. Integration with mainstream applications, such as Microsoft Office Excel 2007, enables you to prototype on a client computer while enabling production deployment on server computers. In addition, developers can leverage the familiar Windows-based integrated development environment (IDE) of Microsoft Visual Studio 2008. They can build and deploy parallel, Microsoft .NET-based applications quickly and easily.

  • Microsoft Office Excel 2007: Microsoft has made significant improvement in Excel 2007 guaranteed to excite spreadsheets enthusiasts. Users can now create spreadsheets with up to 16,384 columns and 1,048,576 rows and benefit from expanded memory capabilities up to the maximum amount of memory addressable within 32-bits. Finally, Excel now includes a multi-threaded calculation engine. This means, that spreadsheets can maximize computational power. When running multi-core, multi-CPU, or hyper-threaded processes, linear improvements can be seen in performance, assuming parallelization of calculations.

Summary

Microsoft Windows HPC Server 2008 brings the supercomputing power of high-performance computing in a familiar Windows-based development environment. Through the use of Microsoft High Performance Computing financial services customers will be more competitive by improving time to market, reduce operational risk by taking advantage of more computational intense calculation methods, and deal with regulatory compliance and date driven mandates. By integrating with products like Microsoft Excel, customers can model in Excel then go into production with as little rework and technical risk as possible. Integration with Office SharePoint Server 2007 provides the ability to lock down models as part of Sarbanes Oxley (SOX) compliance.

Microsoft and its partners are addressing this challenge by creating affordable high-performance computing solutions that meet the business needs of financial services enterprises. Please see the following for more information on:

Solutions for Financial Services