The ultimate goal of modeling is to represent, as accurately as possible, the true product characteristics and their financial implications under various future scenarios. Multiple complex risk drivers can be difficult to model simultaneously. Traditional solutions may resort to separate analysis of specific risks and, in the worst case, the use of independent models. Such an approach has numerous disadvantages including difficulty in realistically modelling risk interaction, and wasted effort in validating, maintaining and reconciling independent models and model results.

AXIS offers a holistic approach to risk analysis within the VA product. Multiple risk drivers can be simultaneously modeled within a single framework, revealing effects of interaction and avoiding simplistic approximations needed to combine risks. In particular:

• AXIS allows for modelling all of the guarantees of your products. Its flexible interface facilitates the specification of various common guarantees including GMDB, GMIB, GMAB, GMWB, GMMB and EEB. AXIS models allow you to define up to 50 different investment funds per policy. Through the use of formula tables, interest and fund bonus crediting and fund withdrawal patterns are very flexible.
• Reinsurance often has an important impact on risk quantification and risk management. Through the use of reinsurance terms and treaties, AXIS provides very flexible and powerful tools to model the characteristics of your reinsurance agreements.
• In AXIS, financial projections are based on the integrated result of assumptions applied to multiple contingencies. Risk exposures like mortality and movements in interest and equity returns are combined with various types of policyholder behaviour, which ensures that you can analyse the realistic impact of risk. AXIS has various ways of modeling dynamic policyholder behaviour assumptions within VA products that respond to the modeled economic environment and may potentially impact guarantee benefit risks and related hedge costs .
• When it comes to modeling economic risk, AXIS possesses the power and feature set to model stochastic scenarios efficiently, and enable detailed analysis of individual scenarios as well as aggregate results.

Our new Hedge Projection module adds another layer of sophistication to your VA model by integrating the effect of potential or actual hedging programs within the same modeling framework and using the same inforce models. You can design and test a variety of hedging strategies and compare their financial impact on an economic or accounting basis, thereby evaluating their potential benefits and effectiveness under various economic conditions.

For more information on AXIS, contact us directly.