The challenge

After a UK multinational finance group merged with another large company, the organization needed to merge its two separate internal models into one that would serve the whole group. Effectively, the goal was to harmonize the Economic Scenario Generator (ESG) process.

The two original companies had previously worked with different providers, so the company needed to choose a single ESG solution to combine the two models into one. The solution would be used for valuation and reporting. In addition to combining the models, the client had many challenging operational constraints in terms of integration and timescale efficiency of the production processes.

The approach

Milliman ESG served as the best solution to unify the models of the merged companies. Even with complex configurations, the transition to Milliman ESG was possible through tailoring the validation process, designing automated reports, and constructing Power BI dashboards. Moreover, as a very active customer of Milliman Integrate, the company wanted to integrate the ESG function with Integrate.

Step-by-step process

Milliman approached the project in phases. One phase requiring several months of work was dedicated to unraveling the discrepancies between the models and defining a normalized process. This helped the team understand what configuration to use and which models to retain. This resulted in improvements to ESG methodologies in the areas of convergence, validation, and calibration methods, and supported optimization and automation of the process.

Harmonized configurations

While Milliman provided a new solution, the client wanted to stay true to the original process it had used previously meaning the modeling choices needed to be consistent with what had already been in place—while still reconciling any differences. Milliman assessed the impact for both ESGs and replicated both configurations in order to move toward harmonized configurations.

Matching internal model requirements

Governance, robustness, and validation were key to matching the requirements of the internal models. Milliman assisted local teams with the choice of the best approaches and the justification of the ESG parameters. These were provided along with complete documentation for auditors and regulatory authorities.

The solution

The client had several experts, but Milliman was quite involved in the decision-making process. Quickly understanding the client’s configuration and outputs, the Milliman team offered an effective benchmark vision for the project. The client depended on this expertise throughout the process including the production piece.

Leveraging Milliman Integrate architecture, Milliman ESG was integrated into this insurer’s framework with the ability to deliver up to 10,000 scenarios at D+1. Today, Milliman is still deeply involved in providing data management, producing calibrations, and estimating parameters for the client. Some parameters are objectified each quarter. Milliman extracts market data and provides the right formatting so scenarios can be produced quickly meeting the client’s business constraints

Learn more about what Milliman ESG can do for you, here.