Our goal is to support insurance companies in building their competitive advantage by providing solutions in the areas that require technical knowledge and experience in finance, mathematics, data analytics, machine learning-based predictive methods and risk management.
KPMG's actuarial services are provided by the team of expert actuaries who combine the latest knowledge in the fields of actuarial science and data science with many years of experience in the insurance industry.
In addition, we have access to experts from the international KPMG network – this way we combine our deep knowledge of the local market with know-how of the leading practices and KPMG’s experience on highly developed markets. We are a member of the KPMG European Pricing Group.
Our services include:
- Data & Analytics,
- Automation and process management,
- Innovative insurance offer,
- Business Intelligence,
- Source of profit analysis,
- Transaction advisory,
- ALM – matching of Assets and Liabilities,
- IFRS 17,
- Solvency II and capital optimisation,
- Review of reserves,
- Employee benefits,
- Other services
Data & Analytics
In recent years, methods based on machine learning (neural networks, decision trees, clustering) have opened new horizons in the key areas of insurance business.
We use machine learning methods in the areas such as:
- the pricing of wholesale products (e.g. motor third party liability insurance), where they perfectly complement the commonly used GLM techniques;
- customer retention and the renewal rate where they provide insight into the main factors of behaviour;
- underwriting – by finding data patterns behind a good selection of risks;
- fraud – by analysing patterns and exceptions.
In most cases, the implementation of predictive analytics can be supported by Robotic Process Automation (RPA) where we cooperate with a dedicated KPMG team.
Our solutions are usually delivered in R and Python. These platforms are flexible, inexpensive and lightweight to implement – they have become a standard that complements the capabilities of commercial solutions.
Automation and process management
With our cooperation between various teams within KPMG, we are able to implement Robotic Process Automation (RPA) in areas covering routine activities around reporting processes, with particular emphasis on the calculation of provisions and the handling of actuarial models.
The main benefits of RPA for insurance companies include:
- improved efficiency;
- reduced operational errors associated with human activities;
- maintained business continuity of processes;
- the 24/7 use of tools;
- improved transparency and auditability of processes.
How are these benefits achieved? RPA allows to:
- start a process under pre-set conditions and continue without human intervention. In the case of actuaries, this could be, e.g., automating SCR calculation according to the Solvency II standard formula and using partial models;
- complete a process, make a report and send it to the recipient;
- automate the control, create logs with the history of activities and exceptions;
- with lightweight IT tools, automation can be adapted easily and cost-effectively to process requirements that are changing over time.
In addition to implementing automation, our advisory services also include:
Apart from the actuarial sphere of the RPA implementations, we also offer our support in deploying automatic customer service and policy handling, loss adjustment, reporting and accounting processes.
Innovative insurance offer
Services in this area are designed to support the creation of new products, the renewal of existing ones and to support the optimisation of product management processes.
Our product management services cover the following areas:
- developing a business plan and product strategy;
- analysing the market, benchmarking;
- product pricing (see separate item);
- reviewing product lines and developing modifications;
- profitability tests and scenario analysis;
- capital adequacy with respect to the existing portfolio under Solvency II;
- optimising product development and valuation processes;
- automating the process of tariff updating;
- documentation of the tariffication process.
Pricing is a critical element of product management. Given the demanding business environment, insurance companies do not find it easy to stay ahead of their competitors, especially on the mass market. The necessary precondition for gaining market advantage in this area is to find risks’ niches associated with propitious and adverse selection, to have the right price flexibility model and to include these elements in the pricing of premiums. This is particularly evident in motor third party liability insurance.
Our team helps to attain this goal by:
- verifying and optimising a company’s existing actuarial linear models (GLM);
- implementing non-linear methods based on machine learning, complementing GLM models and using commercial platforms;
- adding data from external sources to the database;
- implementing price flexibility models;
- optimising premium valuation process, including calculation time.
Business Intelligence (BI) enables efficient and accurate planning, budgeting and reporting, and helps to make decisions and monitor results in real time.
KPMG offers to insurance companies, among others, an insight into:
- loss ratio factors: analysis of the average loss, loss frequency, burning cost;
- sales factors: average premium analysis, hit ratio, CTR;
- sales dynamics by channel and geography;
- trend analysis;
- scenario analysis.
Source of profit analysis
The aim of this service is to implement an analysis of the current operating result broken down to: profit from margin on insurance risk, profit from administrative fees and profit from asset management fees. This allows to identify the reasons for variability of the operating profit and provides an insight into its long-term trends.
As part of our transactional processes, we support parties to transactions in the appropriate valuation of reserves, valuation of future profits, review of MCEV assumptions and methodology, determination of the MCEV and the value of future new business, finding gaps in efficiency and benefits from synergy of financial processes. We carry out due diligence reviews of risk management systems and actuarial due diligence.
ALM – Matching of Assets and Liabilities
Appropriate matching of assets and liabilities allows to increase the predictability of results, minimise the impact of market risks on the condition of a company, and reduce capital requirements under Solvency II.
We support the creation of such an investment policy where the portfolio of assets is well matched with liabilities. We determine the degree of freeing capital up and implement the ALM (asset/liability management) process which allows for continuous management of the match and a rapid response to market risks materialisation.
Given the importance and the number of changes in the methods of valuation and recognition of insurance provisions under IFRS 17, our team is ready to assist in their implementation, in particular in the following areas:
- GAP analysis for existing processes;
- design of the implementation process roadmap;
- high level impact assessment of the new standard with respect to the balance sheet and the profit and loss account;
- design of financial flow models for the valuation of insurance technical reserves;
- creation of methodology, procedures and processes for determining insurance technical reserves in accordance with the new standard, including valuation and recognition of their release in the income statement;
- analysis of client-created methodologies, procedures and processes for their compliance with the new standard;
- adaptation of the existing reporting processes to the new requirements;
- assistance in the definition and implementation of processes for determining KPIs suitable for IFRS reporting.
Solvency II and capital optimisation
We support insurance companies in many aspects related to the calculation process under the Solvency II Directive. We also use our knowledge of risk management, reinsurance, capital valuation and ALM to optimise the capital position of the company.
Our services include:
- valuation and verification of insurance technical reserves in accordance with the solvency rules (BEL & Risk Margin);
- valuation and verification of the Solvency Capital Requirement (SCR) - internal models and the standard formula;
- support in creating and running a project to build an internal SII model;
- validation and review of internal models;
- preparation of an application for an internal model and the handling of the related procedure before the supervisory authority or the College of Supervisors;
- optimisation of capital requirements;
- effective implementation of Own Risk and Solvency Assessment (ORSA) and Asset and Liability Matching Management (ALM) processes;
- data quality management – stratification of data sets and implementation of a continuous quality improvement process for the key data;
- effective implementation of the actuarial and risk management functions.
Review of reserves
Services in this area are to ensure that the financial information reported by our clients is prepared in accordance with the world's best actuarial practices and the relevant financial reporting standards.
Our services related to financial reporting include the following:
- valuation and review of valuation of insurance technical reserves and deferred acquisition costs (in accordance with the following standards: PAS, IFRS, US GAAP);
- product classification (in accordance with the following standards: IFRS, US GAAP);
- preparation of independent actuarial opinions on the value of insurance technical reserves.
According to the Polish Accounting Standards, International Accounting Standards and US GAAP, estimation of provisions for employee benefits requires the application of actuarial methods.
Our services in the area of employee benefits include:
Additionally, we also provide services in the following areas:
- actuarial audits and reviews;
- reinsurance optimisation and review;
- actuarial training;
- development of share option schemes for the management;
- support in contacts with the supervisory authority;
- personnel outsourcing.