Efficient management of longevity transactions key for counterparts

by Artemis on September 5, 2018

As the market for longevity risk transfer continues to reach new heights, it’s becoming essential for the management of such transactions to remain efficient to support sustainable growth in the sector, according to the Co-founder and Chief Executive Officer (CEO) of Dedomainia, Cedric Fetiveau.

Dedomainia is an innovative software development firm with a focus on the actuarial market, which, in December of 2016, launched a web-based platform entirely designed for longevity swap calculations, called LISA, which stands for Longevity Insurance Servicing and Administration.

In light of the growing longevity risk transfer market, which, in the first-half of 2018 reached new heights with a record-setting £21.8 billion in longevity risk transactions taking place for UK pension plans, according to Lane Clark & Peacock (LCP), Artemis spoke with Dedomainia’s Co-founder and CEO.

He explained that as the market for longevity risk transfer, which includes longevity swaps and longevity reinsurance transactions, continues to expand, legitimate questions about the sustainability of market growth have been raised, in terms of both risk appetite and the scalability of the operational process.

Typically, explained Fetiveau, a longevity transaction trade exceeds 40 yeas, which means it’s essential for the insurance claims handling process to remain efficient if companies are to avoid losing control of their operational costs.

“One of the main challenges in dealing with pension scheme population extracts from different administration systems is that a lot of time is spent on crunching, manipulating and tabulating the data into standardised format, a process that is often manual and requires increasing human resources to deal with higher volumes,” said Fetiveau.

The need for increased efficiency resulted in the launch of LISA almost two years ago, which is the first ever platform specifically designed to automate longevity operations handling, and to help firms better manage and cope with the long-term transactions that longevity risk transfer places on their books.

“By combining powerful algorithms with a rigorous effort to structure and organize the flow of information, a series of pre-coded parameters are available to model the different longevity transaction characteristics, rendering the deployment and integration of LISA quasi-effortless for its users.

“Reports and analysis are dynamically generated, giving immediate insight into data consistency, reporting information delays and future cashflow projections, combining financial and actuarial modelling techniques with population movement analysis,” said Fetiveau.

He continued to explain that In 2017, Zurich Assurance Limited selected LISA as the preferred solution to assist with the streamlining of the administration process of their UK longevity swap transactions.

UK life insurer Zurich Assurance Limited, a division of international insurance company, Zurich Insurance Group, which offers life, pensions and annuities insurance solutions to its clients, is one of the leading insurance providers in recent longevity only deals in the UK.

That Zurich Assurance is leveraging Dedomainia’s LISA we-based platform is promising for the company, and suggests that other players in the longevity swap or longevity reinsurance market might also look to utilise the innovative solution to maintain operational efficiencies during market expansion.

Fetiveau went on to explain that while artificial intelligence (AI) and blockchain have become regular words across the industry when discussing automation and visible technologies that might disrupt insurance practices, automation must make existing process more efficient, and not just magnify their inefficiencies

“Creating one global longevity platform to clean and standardise the data’s format for each longevity risk transfer transaction appears as a necessary first step before operational efficiencies can truly be made.

“By adopting LISA, the low value and repetitive tasks of safely storing and manipulating the large flow of information to generate customised and periodic reports can now be largely automated, paving the way for the next set of technologies to be adopted,” said Fetiveau.

Read about numerous historical longevity swap and reinsurance transactions, in our Longevity Risk Transfer Deal Directory.

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