Eikos applies its core competencies to provide solutions that transform risk, setting new standards in turning risk into reward. Analysis is central to this process – the risk equilibration/pricing model represents one of the innovative outputs developed over the years, which has proved invaluable when pricing risk and structuring risk financing options to clients’ best advantage.

Brief Technical Résumé:

Following an intensive data collection and auditing process, probability distributions and correlation coefficients are calculated and entered as parameter into the ‘back-end’ of the model. These can either be at a purely group level or at a divisional level where the various parameters aggregate to a combined group risk analysis.

Through various robust mathematical routines, the data is simulated on a stochastic basis with various insurance levels ‘splicing’ the total loss distribution produced.

The respective pure costs of each level can now be calculated in respect of the limits chosen i.e. internal retentions/inner deductibles, first loss deductibles etc. The model caters for the calculation of an aggregate between these mentioned limits with probabilities of exhausting set levels.

Given that underlying distributions have been crafted, the model can also then allocate insurance costs on a robust and objective basis to participants in the insurance placement - at an inner, captive and pay-away premium level.

Benefits:

The Model is a very useful tool to both underwriters and brokers/clients as a pricing methodology providing very quick and objective loss costs pertaining to client internal retention exposures, exposures to say captives and pure premium costs to Insurers/Reinsurers. The probability of ruin calculation allows one to set an optimal risk retention structure for each individual client and ‘what-if’ analyses are able to be conducted easily and quickly. The model can be interrogated ‘real time’ and results are produced instantly enabling efficient comparisons of options – which lead to effective risk decisions and accurate financial provision. Obviously the simulated results also enable a more effective insurance negotiation – presenting an analysis of loss costs in this fashion assists placing brokers in their negotiation of pricing.

In summary:

Once the ‘mathematics’ have been attended to and the distributions secured to the data, the model can be used and manipulated/interrogated very easily by any practitioner.

Key features of the Risk Pricing Equilibration Model are that the model is: