Milliman continues global expansion, opening new office in Turkey

Milliman today announced that it is expanding to Istanbul amidst growing demand for Milliman’s consulting services in the region. The Istanbul office will specialize in actuarial and strategic consultancy services for non-life, life and private pension, health, and employee benefits. Halil Kolbaşı, an experienced actuary who has worked both in the Turkish Treasury and with Turkish life and casualty insurers, will head the new office. This will be Milliman’s 14th location in Europe. The firm also has two locations in the Middle East, Dubai and the recently opened Tel Aviv office.

Ed Morgan, Milliman’s managing director for Italy and Central and Eastern Europe (CEE), says, “Turkey is an important, fast-growing, and dynamic economy, and as demand for Milliman’s services in the region expands, we see it as critical to have a strong local team in the market. We are delighted to have Halil Kolbaşı lead our Istanbul practice, which will allow Milliman to offer the very best international expertise and innovative new approaches along with a deep local knowledge of the industry.”

Halil says, “As an actuary in the Turkish market for over 20 years, I’ve been observing that there is a need for dedicated, internationally-reputed actuarial consultancy services in the region. With the implementation of standards like Solvency II and IFRS 17, and new technologies in insurance such as data science, insurtech, artificial intelligence, and machine-learning, high-quality expertise from a global leader like Milliman is becoming more and more important. As part of Milliman, I’m looking forward to supporting insurance companies on their existing business and innovative transformations.”

Over 90% of homes in New Jersey and New York could see cheaper premiums with private flood insurance

Milliman has announced the results of a new, independent analysis showing what a private flood insurance market could look like in New Jersey and New York. The study, which was conducted in collaboration with Risk Management Solutions, Inc. (RMS), modeled premiums for most single-family homes across the two states. It also analyzed the potential effect a private market could have on take-up rates—that is, the percentage of consumers eligible for flood insurance who then purchase it.

The report includes additional context for the findings in light of the changing rating structure of the National Flood Insurance Program (NFIP). The study also explores the potential ramifications of “cherry-picking”—the concern that private insurers might target only attractive risks, leaving the NFIP underfunded.

Key findings from the study include:

• Across each state, approximately 94% of homes in New Jersey and 96% in New York could see cheaper premiums with private insurance than with the current NFIP structure.

• In New Jersey’s high-risk zones (NFIP’s Special Flood Hazard Areas), 85% of homes could see premium rates cheaper than the NFIP, while in New York, 72% of homes could see premium reductions.

• Over 360,000 homes could be newly insured for flood if just 10% of homeowners outside high-risk zones purchased cheaper policies in a private market.

• Of the vast majority of homes located outside high-risk zones, approximately 94% (New Jersey) and 95% (New York) could see private insurance premiums as low as $250 annually.

“Hurricanes Harvey and Irma just last year, and Sandy before them, demonstrated the devastating financial effects flood can have on those who are not sufficiently insured,” says Nancy Watkins, a principal and consulting actuary at Milliman and coauthor of the market feasibility study. “As the NFIP begins to modernize its rating structure, Milliman’s study sheds light on how a private market could work in conjunction with the federal program to reduce premiums for many consumers, provide more choices, and increase coverage across New Jersey and New York.”

“As demonstrated in this study, an established private flood market brings with it many benefits, including the opportunity to close the insurance protection gap in the United States,” says Holly Widen, RMS Product Manager, Americas Climate Models. “There are ample opportunities for private insurers to offer competitive coverage in the market, but a strong understanding of the underlying flood risk is critical to maintaining their profitability.”

The study reflects the market of single-family homes in those states, not only those who are currently purchasing flood insurance from the NFIP, and the modeled NFIP premiums do not include the effects of grandfathering. The estimated private insurance premiums were developed using RMS catastrophe model results and reasonable assumptions selected by Milliman. To view the complete report including additional findings and critical assumptions,visit

New Milliman report maps Asia’s life insurance regulatory landscape

Milliman has released its latest report entitled ‘Regulatory diversity across Asia.’ The report is a compilation and insightful analysis of current regulations applicable to life insurers across 14 Asian markets. It provides an analysis of the life insurance regulations in Brunei, China, Hong Kong, India, Indonesia, Japan, Malaysia, the Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand and Vietnam.

The report includes an overview of the main regulations in these 14 markets, governing the following areas:

• Products and pricing
• Distribution
• Reserving
• Capital and solvency requirements
• Investments
• Policyholder protection
• Taxation
• Enterprise risk management (ERM)

Understanding the different stages of evolution of the regulatory regime across Asia will help life insurers, and other organisations with an interest in the life insurance industry, get a better perspective and help them in strategic business planning, market entry, mergers and acquisitions (M&A) and cross-border activities in these markets.

A few observations from the report:

• The markets in Asia are still very much ‘rules-based’ (as opposed to ‘principle-based’). Detailed rules and regulations govern different aspects of the industry.
• Regulators are increasingly looking at areas such as customer protection and meeting policyholders’ reasonable expectations (PREs), although these areas are still at a nascent stage in many of the markets.
• There is also an increasing focus on strengthening the governance environment through the Appointed Actuary/Chief Actuary systems and the role of board committees.
• There is a clear trend towards adoption of risk-based capital (RBC) regimes and the enhancement of such frameworks, wherever already adopted.
• The regulations in several markets are changing rapidly.

To read the report, click here.

The release of PRA Policy Statement and Supervisory Statement on financial management and planning by insurers

In May, the Prudential Regulation Authority (PRA) issued two complementary publications in response to its November 2017 consultation paper CP23/17 ‘Financial management and planning by insurers.’ The policy statement and supervisory statement issue further guidance and feedback based on industry responses to CP23/17, which set out the PRA’s expectations on effective financial management and planning by insurance firms and groups. This paper by Milliman’s Marie-Lise Tassoni and Fred Vosvenieks provides an updated summary of the supervisory statement.

EIOPA’s Insurance Stress Test Exercise 2018

In May, the European Insurance and Occupational Pensions Authority (EIOPA) launched its fourth stress test exercise for the 42 largest insurance groups in the European insurance sector. The 2018 EIOPA stress test exercise aims to assess the vulnerability of the EU insurance sector and comprises three specific hypothetical adverse scenarios which are informed by current market conditions, the risk climate and their potential impacts on the insurance sector.

This paper by Ian Humphries and Fred Vosvenieks looks into the three stress scenarios, the calculation methodology requirements, reporting timeframes and disclosure requirements, whilst highlighting why non-participating insurers may find the exercise and the subsequent results of interest.

Annual Milliman survey reveals gradual shifting from full underwriting of UL/IUL products to simplified issue and accelerated underwriting approaches

Milliman today announced the results of its annual comprehensive study of universal life (UL) and indexed universal life (IUL) issues, which for the first time includes the reporting of sales by underwriting approach. The 11th annual Milliman study, “Universal Life and Indexed Universal Life Issues,” focuses on current topics relative to universal life with secondary guarantees (ULSG), cash accumulation UL, current assumption UL, and the corresponding indexed UL (IUL) versions.

This year’s report found that, between January 1, 2017, and September 30, 2017, the distribution of UL sales (on a premium basis) by underwriting approach was 29.8% simplified issue, 1.1% accelerated underwritten, and 69.2% fully underwritten. Comparing calendar year 2016 to the first three quarters of 2017, there was a 2.5% shift from fully underwritten sales to simplified issue and accelerated underwritten sales.

Similarly, between January 1, 2017, and September 30, 2017, the distribution of IUL sales by underwriting approach was 2.6% simplified issue, 16.8% accelerated underwritten, and 80.6% fully underwritten. Comparing sales in calendar year 2016 to the first three quarters of 2017, there was a 16.2% shift from fully underwritten sales to accelerated underwritten sales.

The life insurance industry has been moving away from full underwriting of life products to simplified approaches with fewer or different requirements and more timely responses, while still considering the implications of mortality cost. Nineteen of the 29 respondents reported using more than one underwriting approach. Of the 29, simplified issue underwriting is being used by nine participants, accelerated underwriting by 12 participants, and full underwriting by 28 participants. Eleven additional participants reported they will or may implement accelerated underwriting programs in the future.

“Carriers are focusing on improving the life underwriting process with the use of new technology, such as predictive analytics, the reduction of underwriting costs, and the shortening of the approval process. These improvements are possible when using an accelerated underwriting approach, which likely explains some of the shift we’re seeing,” says Sue Saip, consultant in Milliman’s Chicago office.

In addition to underwriting information, the survey also indicates that sales of chronic illness riders and long-term care riders on UL/IUL policies continue to grow. During the first three quarters of 2017, sales of chronic illness riders as a percentage of total sales were 8.7% for UL products and 38.5% for IUL products. During the same period, sales of policies with long-term care (LTC) riders as a percentage of total sales (by premium) were 33.2% for UL products and 10.9% for IUL products. Within 24 months, 83% of survey participants possibly will market either an LTC or chronic illness rider.

The 404-page “Universal Life and Indexed Universal Life Issues – Detailed Report” also includes detailed information on product and actuarial issues, such as sales, profit measures, target surplus, reserves, risk management, underwriting, product design, compensation, pricing, and illustrations.

The report is available for purchase here or by calling Gina Ritchie at (312) 499-5605.