ARC and Watson Wyatt launch capital model in response to ICA initiative

Simulum 3 makes debut at 2009 ARC Congress

ARC, the UK trade body for legacy management professionals, and global consulting firm, Watson Wyatt, today launched “Simulum 3” at the 2009 Congress.  The first capital model to include features to meet the specific needs of the legacy sector, its launch marks the culmination of a one year initiative by ARC.

The affordable, user friendly capital model will assist ARC members to meet regulatory requirements on Individual Capital Adequacy Standards (ICAS) and the strategic modelling needs of legacy operations. Equally important, it is also the first capital model designed to enable any underwriting operation – whether live or discontinued – to model the potential capital impact of legacy initiatives ranging from commutations and schemes of arrangements to disposals and restructures.

ARC Chairman, Paul Corver, commented: “The launch of this capital model could not be more timely. The current capital squeeze is placing ever more focus on the potential for releasing capital currently tied up supporting prior years liabilities. This may be a capital model developed for the legacy sector by the legacy sector, but its potential applications are much wider.”

Rob Collinson of Watson Wyatt said: “We are delighted to have worked in partnership with ARC in developing this industry ‘first’.  The legacy features of the model were strongly influenced by the valuable feedback contributed by ARC members and we are confident that the model will be a powerful tool to address the challenges of the sector.

In addition to the features included to model ongoing business, Simulum incorporates a range of capabilities to meet the specific needs of the legacy sector which include:

• Detailed modelling of reserves to enable identification of areas where commutation or additional reinsurance might be beneficial
• Application of individual large historic claims to back year reinsurance to help identify the likely benefits of individual reinsurance treaties and potential targets for outwards commutation
• Facilities to  support Part VII negotiations, potential schemes of arrangement and also to assist with pricing of incoming run-off books of business
• Outwards and inwards commutation management facilities
• A detailed reinsurance credit risk model

A demonstration of Simulum 3, at which delegates will have the opportunity to see its capabilities and applications, is being held at 11.30am in The King’s Gallery on February 25.

For further information:

Fiona Gibson, Haggie Financial 020 7417 8989
Alexandra Parry, Haggie Financial 020 7417 8989

Paul Corver, Chairman of ARC 020 7488 5448

Bruce Wraight, Watson Wyatt   01737 273 370
Kirsty Gray, Watson Wyatt   020 7227 2660