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A recent report from Deloitte asserts the importance of actuarial modeling to insurers' ability to effectively underwrite, as well as the importance of an overarching governance policy to maintain continuity. The research indicated that U.S. insurers lag their international counterparts when it comes to formal governance by 25 percent—half of U.S. insurers use formal governance to drive actuarial controls, compared to 75 percent of non-U.S.-owned insurers. The following 10 leading practices were culled from survey results and follow-up discussion.
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high stack of folders isolated on a white background

1. Develop a single set of standards regarding model building and documentation

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2. Create a corporate culture in which employees understand the value of and seek to improve governance and controls across all functions

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A spiral bound book marked The Rules, filled with official instructions, directions and commandments as the organization or team's rule book

3. Establish a dedicated structure related to the modeling organization, with clear and delineated responsibilities for development, maintenance and change management, including the coordination of user-acceptance testing and the establishment of an inventory of models

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A dictionary page with the word change circled to define the term as adapting and evolving to conditions that require shifting your perspective or actions to survive and thrive

4. Define change request procedures for revisions to production models and clearly communicate request prioritizations across user groups

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5. Establish protocols for updates/upgrades to the actuarial modeling platforms, operating systems and other systems that support the modeling process, such as spreadsheet programs, including regression testing

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Calculator, spreadsheet and hand writing

6. Controlled and automated attribution testing processes to identify and quantify differences due to system, logic or data updates, which is an even more critical component of model integrity in cases where multiple areas use a common model

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pro und contra

7. Establish a prioritization scheme to rank models, or specific components of models, and use prioritization to establish frequency and intensity of reviews

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Business people discussing during a meeting

8. Develop a production model

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Group of business people assembling jigsaw puzzle and represent team support and help concept

9. Monitor the model users' skills, including training and development/software accreditation

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Abhaken Checklist

10. Conduct ongoing reviews of models' functionality against new developments