Organised by the EAA - European Actuarial Academy GmbH.

The Economic Scenario Generators are at the core of stochastic models used by insurance companies. The applications of stochastic models are very diverse and include such applications as economic capital under Solvency II, ALM projections, dynamic hedging etc. All these applications impose different requirements upon the generation and the validation of economic scenarios.

This seminar has been designed for participants who are interested in Economic Scenario Generators because they deal with one or more applications of those and who are familiar with the basic concepts of financial mathematics. In-depth knowledge of capital market models is clearly NOT a pre-requisite, as this seminar has not been assembled for absolute subject matter experts.

Attendees are encouraged to bring a laptop computer with Microsoft Excel installed. 

In the seminar, we begin by discussing what it takes to build an ESG and place particular emphasis on interest rate models and equity models. After a case study on the main ESG building blocks we move on to discuss credit risk modelling, since hardly any bond is risk-free anymore. We conclude our program on Day 1 by considering variance reduction techniques which help enhance the efficiency of ESG applications.

On Day 2, we cover theoretical and practical aspects of two important ESG applications, namely Solvency II Internal Models and Dynamic Hedging, via dedicated break-out sessions. In the Internal Model section, we discuss Least Squares Monte Carlo and Accelerated Nested Simulations as efficient approaches for economic capital calculations. We discuss ESG recalibrations for LSMC as well as selection of primary adverse real-world scenarios for accelerated nested simulations. In the Dynamic Hedging section, we cover hedge performance reporting which is key to getting credit for hedges under Solvency II. Last, but not least, we discuss selected aspects of ESG validation.

Michael Leitschkis is a Principal and Consulting Actuary with Milliman. Michael has been dealing with various ESG aspects for about 10 years in the context of MCEV and Solvency II, including credit risk modelling and proxy modelling techniques such as Least Squares Monte Carlo. He has been part of the German Actuarial Society (DAV) working party dedicated to Economic Scenario Generators and taught Financial Mathematics at the University of Cologne.

Laurent Devineau is the Head of the Research and Development team of Milliman France. Laurent also serves as lecturer for ENSAE (a French actuarial school), French Institute of Actuaries and researcher in Lyon 1 university. Laurent has been involved in many financial risks modelling projects like reviews and implementation of ESGs and more broadly in Solvency II Internal Model development using proxy modelling techniques such as Nested Simulations, Accelerated Nested Simulations, Replicating Portfolios or LSMC.

Fabien Conneau is a Consultant of the Research and Development team of Milliman France, where he is in charge of the financial modelling research. Fabien also serves as teacher in ENSAE (Quantitative Finance). Fabien has been working on various financial modelling topics such as the implementation, documentation and review of ESGs, integration of spread risk in an ESG and an ALM model, and development of proxy modelling techniques for Solvency II internal models.

Russell Ward is a Senior Consultant with Milliman, focusing on capital modelling, guarantee product development and ALM all of which involve the use of ESGs.  Prior to joining Milliman, Russell headed Ernst & Young’s actuarial modelling services for Europe leading implementation of stochastic asset-liability models and the review of ESGs for some of the firm’s audit clients. While on secondment to the FSA, Russell played a key role in the development of the regulator’s approach to the review of risk-based capital under the Individual Capital Assessment (ICA) regime.

Neil Dissanayake serves as CEO of Milliman Financial Strategies and the head of the European trading team for Milliman’s Financial Risk Management practice. He is responsible for the monitoring of the European market risk exposures for Milliman’s global hedge services clients, who have a total of $85bn assets under management. Neil has developed significant experience in hedge program designs and implementations for Variable Annuity (VA) products (valuation, capital markets and performance reporting). He has in-depth knowledge in market consistent pricing of guarantee products and their sensitivities using ESG.