Because financial modeling makes it possible to measure the effects that decisions and strategic changes would have on a re/insurer’s financial performance, it is increasingly at the heart of the business planning process.
It helps to determine all aspects of portfolio management, including capital allocation. By measuring the potential profitability of each class and weighing it against the inherent risks, it provides the information needed to determine what types of business to write and also your pricing strategy.
How you use the information will depend on corporate priorities. For example, if long-term return on capital is the number one objective you may respond differently than if it is profit stability and differently again if it is high security ratings. Whatever your goals, however, you need to have reliable information and analysis in the first place.
Further information on business planning
