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Simon Pollack on the Price Writer Podcast Episode 22
12 Plays1 month ago
In this insightful episode, Simon joins Jeremy to explore his 30-year journey from consulting to building Calibrant, a leading MGA consultancy, and developing Sybil, an innovative portfolio management platform. Simon shares his passion for portfolio management, emphasising its critical role in ensuring long-term profitability in insurance. Key topics include:
- The Value of Portfolio Management: Why nurturing existing portfolios is essential for sustained success.
- Breaking Down Silos: How collaboration across pricing, reserving, and underwriting can unlock untapped potential.
- Overcoming Challenges: Tackling messy processes and the limitations of spreadsheets with innovative solutions like Sybil.
- A Bayesian Approach: Using continuous data updates and control cycles to refine models and drive better decisions.
This episode highlights practical methods for turning insights into actionable, profitable outcomes. Learn how Simon and his team are defining the future of portfolio management!
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Transcript
Simon's Background in Actuarial Science
00:00:00
Speaker
Hello Simon, welcome to the show. Good afternoon Jeremy. Excellent, how are you today? Super, super well rested, well prepared. Excellent, excellent, good. Okay, so the first question is how did you get where you are today?
00:00:15
Speaker
um Well, da I, like you and like many of your listeners, am an actuary by training and by origin. um I have recently completed 30 years in the industry. So I'm an actuary of some seasoning, I think one might say.
00:00:32
Speaker
i i think the the early part of my career of it was spent in pricing, um in both consulting and then um London market companies. And I found myself constantly drawn to the front line.
00:00:48
Speaker
I've really been somebody who likes making or contributing to decision making that's actually going make a difference in the performance of a business.
Impact vs. Regulatory Roles
00:00:56
Speaker
um I think if I look back now, forcing me to think about origin, which you've given me a heads up about what we're going to talk about today.
00:01:03
Speaker
It's interesting because the theme that runs through my career has always been making a difference, being someone that contributes to decision making. And I find that...
00:01:14
Speaker
or perhaps this is why i'm not an academic um with all the best will in the world the greatest possible models the greatest possible insights are in a commercial context meaningless unless they're going to make a difference to the company and the way obviously the industry has gone in the last couple of decades has been such that a lot of people have been tied up in very important jobs that aren't actually making any commercial difference to the business i'm talking about kind solvency two type things yeah um where you have ah a huge movement and it sucked a huge amount of resource into it as well.
00:01:46
Speaker
um Perhaps that's tailing off. um But certainly the big consultants and people like that, they spent a lot of time and lot of resource selling services to get people ready for them and then implement their Solve Institute processes.
00:01:57
Speaker
And I didn't view that as being a bit of a shame because you've got highly trained people, um and ah the people who are not only trained in technically, but they're trained in the kind of commercial context of the business, um whose work is largely there just to filling forms, report to regulators.
00:02:13
Speaker
And that's always been something which I've avoided. I've never enjoyed that for myself because it's even with with good quality work, you're not actually making a real difference other than just keeping the regulator happy and therefore keeping the lights on, I suppose.
00:02:24
Speaker
One can say perhaps that the the refinement of capital models is going to be ah used to to identify opportunities for the business to be run more
Structured Reinsurance Programs
00:02:33
Speaker
efficiently. And there's value in that. But I'm talking to my friends who have worked heavily in Solvency I've often found that that was an ideal that never got realized.
00:02:42
Speaker
so So, yeah, my my career has been mostly in in um and and ah frontline business. Now, I did spend some time probably but well well before Solvency 2, actually, working with um a consulting firm ah that designed structured projects designed and structured, sometimes designed structured reinsurance programs and deals to actually help people manage their results um more effectively with reinsurance.
00:03:09
Speaker
And that was actually drawing up term sheets, drawing up slips, actually implementing deals. So that was not just advising an underwriting team on how best to price their business. It was actually doing well. deals and that was fun as well and I really enjoyed that and I'm coming in a little bit back full circle to that now with where we are with Calibrand and Civil, the the two businesses that i'm involved with at the moment because we actually do effect ah MGA transactions finding capacity providers for MGAs. So it's funny how the origin of the things that have been exciting me throughout my career have kind of finally found up flowering
00:03:46
Speaker
in actually doing deals, and some of them quite big deals as well. So so um now I'll come to that in a
Advocating for the Actuarial Profession
00:03:51
Speaker
second, though. um So I've worked in in in several functions, worked in in the context of reinsurance companies, insurance companies, lawyer syndicates.
00:03:59
Speaker
I've worked in commercial lines, personal lines, some heavy-duty specialty stuff, and some pretty vanilla stuff. um I enjoyed it all. i'm I'm a big advocate and fan for actuaries and the actuarial career.
00:04:10
Speaker
And I think that the people that say it's a good career because you get good work-life balance and a secure salary and job security, I think they're missing the point because actuarial work in insurance is fun.
00:04:22
Speaker
had The idea of taking some data, say, finding some insights that the underwriter or the underwriting team has never thought of before, and then making a difference based on those insights is just what flows my boat. So that's that, suppose, is the origin of of of my career.
00:04:38
Speaker
And there's a degree to this at to which that's just a personality thing, I suppose. um But at the same time, i mentioned that the the majority of my career was pricing in that stage, in that first half.
Limitations of Pricing Models
00:04:49
Speaker
But I do think with a bit of a retrospect that I realized that pricing wasn't actually pricing. you know The pricing work that I was doing and the pricing work that actually was often just building a technical pricing model.
00:05:04
Speaker
Sometimes an underwriter, if it was case price business, would just have an underwriter judgment factor and they could knock the influence off the price. And so what value did I add in that? um And even in commercial even in personal lines, and in retail um insurance business, where the statistical analytical work is genuinely going to be used in the price that they pay, that's often manifested in the relativities that you have.
00:05:30
Speaker
And you you tend to find, I do remember a few years ago working for a company where um we sold one product, in that case was home insurance, and so through four or five different big channels with the same pricing relativities.
00:05:41
Speaker
And yet the results were extremely different. And so yeah there were aspects in those relativities that were not being picked up in the um data that we had. In other words, some degree, the channel itself was a slightly unidentifiable but hugely important rating factor in its own right.
00:05:57
Speaker
And so you would do these models, and then and then but you'd still have great big levers up or down, base rates, say, based on the channel. and And so you you you kind of realize um not quite that your whole career has been useless because because that would be silver strong.
00:06:13
Speaker
But so but um but then your what you've been doing is something which has deliver delivered some value, but it isn't actually the price. You haven't been telling the underwriters or the underwriting team or the business the exact price to sell the business at.
00:06:27
Speaker
And therefore, what value does pricing have in that context?
From Pricing to Portfolio Management
00:06:32
Speaker
And that has been an important question for me. um And so the insight I suppose I got from that is that it's more the discipline pricing.
00:06:41
Speaker
and what you do with the insights of the end of it. than the act of pricing itself that that is the value. So um if you were to say that what we were doing is creating technical pricing models, and then I'm going back to out-of-return insurance and just sort of case-underwritten insurance now.
00:06:58
Speaker
If you've got pricing models which are delivering technical price, um then every time we transact a deal, a policy, so long as we're recording the actual price, and we've got the technical price, then we've got the APTB ratios, a measure of rate adequacy at the point of underwriting,
00:07:13
Speaker
um And then tracking those over time and making sure that the difference from technical price and APTP ratio of 1.1 is meaningful, even if it isn't literally, you know even if that technical price was um had some some some uncertainty in it or whatever.
00:07:29
Speaker
So long as i' I'm disciplined about capturing APTP ratios, then I've got something which can be fed into a process that can help me underwrite a book of business for profitability over time. Now, that's been the thing that I think probably has morphed a pricing actuary, me, into a portfolio management actuary. And that's where, that I think is where I am now.
00:07:50
Speaker
Actually having a process where the rate adequacy monitoring affects results is one aspect of
Continuous Improvement in Pricing
00:07:56
Speaker
it. The other aspect of pricing, which is less, um is not really spoken about very often, but the amount of error that gets into pricing models.
00:08:06
Speaker
um Making sure that we have the ability to actually, and then this error could be this error could be the data was poor, data wasn't complete, or it was written. Or we made some judgment calls about the point at which we take large claims out.
00:08:20
Speaker
Or we have just a little bit of optimism in our mindset, especially when an underwriter is that's sitting there trying to influence. Yeah. yeah So there's some bias in there as well and done just some random variation that that throws us off soft track.
00:08:37
Speaker
Absolutely. Absolutely. um There's all sorts of reasons why individual biases or biases in the data, um errors in the process. so um The model we could be fitting might not be the best model for that data. You know, you've got you've got types of, there are different types of error on there. there this yeah or There's an error in in the actual model itself, in the parameterization, sorry, errors in the parameter estimates. You know, every parameter estimate has uncertainty in it.
00:09:01
Speaker
You've got the possibility sometimes that the model itself is not the right model for that business. So you've got the model that. Yeah. And then you've got obviously random error, just the fact that your data wasn't sufficient to complete to actually make the mean of those estimates the right means.
00:09:16
Speaker
so So there's all sorts of reasons why pricing models don't have a very high degree of accuracy. And then the mindset is, and this again gets you into into portfolio management in the way I define it anyway.
00:09:29
Speaker
which is there needs to be a process into which these pricing in insights, not just the rate adequacy, but the actual findings of the pricing models themselves, needs to be somehow held to account. There needs to be a correcting mechanism.
00:09:40
Speaker
I think this correcting mechanism over time um is one which is a refinement game. So you're going to have to go through, set up an initial pricing model, monitor the results relative to those prices, and over time see whether you need to change your assumptions because, I don't know, customer behavior, some form of inflation that was not evident in the data or other things have come come and played a part in it, and you therefore need to be able to correct those pricing models over time.
00:10:10
Speaker
And so when you think about how you would be effecting a corrective mechanism of pricing, typically, and I talk both culturally and technically here, typically the pricing actuary, him or herself, is not going to be the person that corrects that pricing
Human Interpretation in Insurance Decisions
00:10:30
Speaker
model.
00:10:30
Speaker
um Either they are ah doing a piece of work, feeds into the underwriters, and then the underwriters just make a bunch of decisions, or they are not able systematically and regularly to monitor the results in terms IBMR coming in and doing a reserving process for want of better expression.
00:10:47
Speaker
doing this in a 90-hour process, you need to be able to get that process feeding into pricing um and frequently update. And when I say frequently, I don't mean once a year typically. I mean, um I think you, unless you've got a single deal that just remuse each year, you've got yeah a pricing set, a rate set, you need to be, ah inflation can be perniciously persistent.
00:11:08
Speaker
Yeah. activities can happen in the market that change behaviors. Typically brokers come in and selling cheaply or something like that. There's all sorts of things that can happen that means to be on it much more frequently than once a year.
00:11:19
Speaker
And so so you need to be able to bring the best insights from pricing actuaries. You need to be and bring the best insights from um reserving actuaries or let's call it performance management actuaries. You need to be bring the best insights from the underwriting team to who are telling you, I'm hearing that ah there's another competitor that's coming in and undercutting people, or I've got this relationship with this broker, which means I'm willing to cross-subsidize this for that.
00:11:42
Speaker
There's all sorts of all sorts of people who've got to come together to be able to use get the best out of pricing insights in order to deliver a well-managed portfolio. And this then kind of led me to develop to veno concept of portfolio management, have up out of which me and a and a team of um colleagues built two businesses.
Central Process of Portfolio Management
00:12:08
Speaker
um When you define portfolio, and write it down here, portfolio management, um is we define it as a process, the three components of it, a process where human decision making is informed by our insight.
00:12:21
Speaker
And each of those parts, each of those three parts are very important to me. So as ah going back to what I said originally, human decision-making, if you can't make decisions on the back of this insight, then the insight's useless. So human decision-making and not algorithmic decision-making, because I'm not really a big believer in insurance, which is messy.
00:12:39
Speaker
Insurance is a messy business with incomplete data and all kinds of weird things happening. So you need humans in there ah interpreting and contacting them. Yeah, I totally agree. Absolutely.
00:12:50
Speaker
ah Every experienced, all proper senior experienced actors know this. We can't just let models roll. yeah Tell Elon Musk. but you are that's just There's just too much unset. There's too much we don't know. And the world, as you just said, is forever in motion. The idea that you can just set so play on something and it will work forever. Absolutely. Absolutely.
00:13:13
Speaker
Yep, exactly. So i so so you need the pro you need you need human decision making, but it has to be this process so that you have the ability for those humans to be able to take the analytical insight and incorporate into the decisions they're making. So the process is a really important part of portfolio management for me.
00:13:30
Speaker
And then obviously the core of it, the actual insight that's going to be used to make those decisions is the analytical insight that I talked about. So you've got all three components in portfolio management, a process where human decision making is informed by analytical insight.
00:13:43
Speaker
um The analytical insight, because as I mentioned, I think it's it's not annual. If you're going to do it properly, you should be running models, running analyses, bringing new data, working on it, and having discussions every quarter or maybe every month.
00:13:58
Speaker
so So what you end up then with is a an analog analytical process, which is a lot of heavy lifting, right? So you've got to find a way operationally of efficiently getting insight into your process.
00:14:11
Speaker
So there's all those component parts. And portfolio management, I suppose, is not easy. um But I think I would call it the apotheosis or the culmination of what is the best about actuaries and actuaries working across multiple disciplines and working with underwriting teams.
00:14:27
Speaker
yeah It is where the best of those insights actually get into the business and make Performs make profitability happen and make happen consistently and with an enduring base.
00:14:39
Speaker
So that's for me what portfolio management is. And um I realize I've been talking a lot for the last couple of minutes, but but but um you asked me where it all came from. and And this is where it came from. Where we are now, all of this is to get to where we are now.
Creation of Calibrant and Sybil
00:14:53
Speaker
2021, I settled business with five colleagues ah called Calibrant. um And Calibrant is a, it's subsequently become a directly FCA-authorized insurance intermediary. So it's an intermediary and advisory firm which sits between MGAs and MGA.
00:15:12
Speaker
So we specialize in delegated authority. ah so So it sits between the MGA's and their carriers to help manage the performance of that book. and And so there's a large part of it, which is um and and and the analysis. So we have actors.
00:15:24
Speaker
um But there's there's also a large part of which is around the process and delivering the process to the right decision makers at the right time. in a well-governed way with reports and transparency.
00:15:35
Speaker
So, and and indeed, because of the nature of the deals we started with, we've actually got some technical underwriting capabilities as well. so um So we've built this business, which which, and it was successful from day one, um yeah which which is based on portfolio management.
00:15:49
Speaker
And it's in the context of of ah of ah an area of insurance which is growing itself. MGAs, we all probably know. It's just the the buzz thing these days. um and um And the beauty about MGAs is what I define as portfolio management is ah an existentially important discipline for these people because they have a portfolio.
00:16:10
Speaker
And if they lose their career, they're in potentially some serious trouble. So so a definition of a portfolio and the importance of portfolio management is very clear. ah in the MGA world. So that's where Calibran operates, primarily in MGAs.
00:16:24
Speaker
And finally, before before before finishing this origin story, um we we we built, I talked about the degree of analytical heavy lifting that you have in portfolio management as you feed the actuarial insights into the process.
00:16:37
Speaker
um That is hard. And doing that consistently, and doing it well, um requires more than ah bunch of spreadsheets. And if it becomes a bunch of spreadsheets, um I mean, the original, but the first deal that we did ah ah at Calibrandt um It was a large MGA place with a large carrier that then moved to a another large carrier.
00:16:57
Speaker
And by the time sort of last year came around, when Calibron expanded and moved into this other business, um I had sat through, it wasn't all through Calibron, but there was a continuity. I had sat through 70, I think, caught monkey meetings every single month.
Limitations of Spreadsheets
00:17:12
Speaker
Right.
00:17:12
Speaker
doing the analysis, bringing the analysis in. Analysis has been done by multiple people actually. And parts of the analysis is assessments of the effects of past actions. Part of it is there's IBNR inputs and changing views of IBNR.
00:17:25
Speaker
And then you found that you have literally thousands of linked spreadsheets or spreadsheets that either should or should not be linked. And you're putting out various bits of them and and and it's utterly unmanageable. And that's for one, will be a big portfolio business.
00:17:41
Speaker
So if you wouldn't do portfolio management seriously for an insurance company, and you're doing across multiple portfolios, the idea of trying to do that in spreadsheets, I think fantastic. It was for the birds. So part of what Calibrate did, we built a piece of software, which which we call Sybil, and we now market Sybil as ah an independent piece of software, irrespective of what Calibrate is doing.
00:18:04
Speaker
So we have have clients for Sybil. um And it is a portfolio management platform. It can incorporate the the insights that the analytical work provides, but it also makes sure the analytical work is there and and feeds those those dashboards. so So now we have Calibrant and we have Siple.
00:18:20
Speaker
um I finally managed to shake annoying bosses off my back. second here already for the end well but that's always been So most entrepreneurs say that that's one of their most important um ah drivers, not having to work for anybody.
00:18:35
Speaker
Other than your client. relate to that very strongly in slightly different
Entrepreneurial Freedom
00:18:40
Speaker
way. But yeah, it's some it's a it's a yeah and it's a great its great feeling not to have to... Sometimes you get great bosses, but when you don't have great bosses and you think you do a better job, make better decisions, it can be very frustrating. so So now the decisions that me and my team make, we stand and live, we fall or die by them.
00:18:57
Speaker
Or stand or fall, I should say, by them. And um and and and nasa I enjoy that. I enjoy that. We eat what we kill and we are our own bosses. So... That's where we are. and That's where you are, two businesses.
00:19:08
Speaker
Excellent. And what would you, well it sounds then like the portfolio management is your mission then for insurance.
Promoting Portfolio Management
00:19:18
Speaker
It's about getting that adopted and getting everyone switched on to that.
00:19:23
Speaker
you want to tell me a bit more about that and how the adoption's going? Yeah. I would say that is a mission, and it's a mission more than I ever thought it would be. Because if um
00:19:38
Speaker
If I'm out there identifying or actually sh defining what portfolio management is, and that is ah something which people are only doing casually or on the side of their desk or not at all, then part of our mission not only is to run these businesses and to to to make these businesses successful, but it's actually changing people's mindsets a little bit.
00:19:58
Speaker
It's actually evangelizing for what we're defining as portfolio management. And getting people to somehow put their hands in their pocket, but buy into it in such a way that they're willing to pay some money, whether it be software license fees or intermediation fees, for the work that we would do to to make portfolio management real for them.
00:20:20
Speaker
And so so the idea is that um we we have ah both a ah sort of an evangelizing mission and a business mission. And they are effectively the same, but they are intertwined. so So a lot of the material that we've produced, we've got a lot of blogs on our website, on Calibran.
00:20:36
Speaker
I think we mirrored them onto the Sybil website. Can I plug? Yeah, absolutely. calibrate tinjamers dot com is the callirate business and sil dot cloud is the software business and and so yeah it's on these websites we do have blogs and a lot of those blogs are what i would call for leadershipship ah i've got one get in theory we've got things on informs of data we brought yeah nuclear war metaphors and and and certain sense onto it and the importance of data um and and um and and I've i've written ah some stuff on on pricing and what what pricing is and what it isn't and as a sort of what I was just talking about before so we're doing a lot of work on trying to get people bought into the idea of portfolio market and that's ongoing and it will continue um so so I think
00:21:22
Speaker
Part of that mission when it comes to the the the so rubber hitting the road is is um once you've got someone who, if you like, emotionally or intellectually understands that Port Ferry of Manningham is a thing that they should do and they believe in it.
00:21:38
Speaker
add value to them. And I think it is it is a it is way of um creating an enduring value out of a portfolio that itself probably has been hard won.
00:21:49
Speaker
Don't forget most of these portfolios are business that we talk about. I'm not talking about making money and growing a business by investing in new lines or investing in new products or hiring new underwriting teams. I'm saying you've done it. You've got these. You've hired these people. You've been through the risk. You've been through the upfront investment, and cost investment, expense investment.
00:22:07
Speaker
And you've got a portfolio business. And if it's not nurtured, just like a flower bed, if you don't nurture it, you don't weed it and prune it, then it will become messy, underperforming, and all that kind of stuff. And let's call it not attrition, that's the wrong word.
00:22:27
Speaker
atrophy, entropy. yeah There is a way in which um portfolios can can atrophy or entropy can set in. And and you end up um you end up with a portfolio which umt ah it only ever gets looked at when someone is realizing that they're losing a bit of money. And usually this is two or three years after it started you losing some money and it's becoming a catastrophe or a crisis. you know um So yeah, not front foot.
00:22:52
Speaker
Yeah, when things suddenly come onto the radar because they're losing money, which which means they've finally been reviewed. and the the The losses have been noticed. And then it's the the turnaround plan. But by then it's too late. it It's, yeah, you are you know, it's a long time between writing business and the the experience coming through. Well, you know, the term itself would be...
00:23:13
Speaker
and Usually with insurance, we all know it's more of a supertanker than a speedboat, right? Especially when you're, because that's usually coming from ah from a CFO who is usually living earned results.
00:23:24
Speaker
And by the time you earn utility adequacy into your business. So the problems probably have been there for two or three years. young And then the fix will always be at least a year um to get better results.
00:23:37
Speaker
And so usually you've got two or more years of poor results, which over the course of an underwriting cycle, say, there isn't enough time to fix that typically. And so so that way of managing insurance is is not successful. And we see it, I'm seeing it, you've seen it, I'm sure, many, many times.
00:23:52
Speaker
um So the idea is to to say, let's nurture these portfolios. And I know it's not as exciting as growing new things, but um if you do it well, then you can create the value out of your existing business that a itself could fund all those fun stuff that you as a CEO of an insurance company want to do, hire new people, build new claims team, ups or whatever it is you want to do.
Control Cycles in Actuarial Models
00:24:11
Speaker
so so So what we're trying to do is take existing portfolios and create enduring value out of The trouble with that, um or the difficulty of that, the mission that we have in practice,
00:24:21
Speaker
um is that um ah what it boils down to for me is is overcoming, what, 20 years ago, 25 years ago I was studying it, was the sort of eye-rolling that I had about control cycles.
00:24:36
Speaker
So when I talk about the the yeah so pretty much are the process of portfolio management, it is a control cycle. That is what I'm talking about. And I remember thinking, well, control cycles are so obvious. Just give me some data, find some insight.
00:24:48
Speaker
But I really believe in control cycles now. As I've as i've matured, um i realize that unless you build a process, unless you have a cycle which and identifiably brings data into a process, does certain predefined analyses, delivers these analytical results into the, in the case of Cibli, dashboards or something, um and unless you have that process, that then this thing is going to lead to decisions and then the cycle repeating once you've made the decisions, you can test the effect of those decisions with new data coming in,
00:25:18
Speaker
refine and all that kind of stuff over time. It's the its it the control cycle and is such an important part of this. And it's the control cycle, i'm not only making the decisions, but it's also it's also it's also the control cycle.
00:25:29
Speaker
It's not just the decisions that you're going to test through the control cycle, but it's the assumptions of the parameters of your model that you're going to... Those those assumptions sometimes are heroic, sometimes they're just best guesses, not heroic, but one way or another, you've got a bunch of assumptions in your modeling process.
00:25:46
Speaker
And it's that control cycle that's going to cause you to be able to refine your assessments of those parameters um and and refine those assumptions um to make sure you're the truth that you're grasping at is ever closer.
00:26:00
Speaker
and And truth... um I don't believe in my truth and your truth. I think the truth exists. i um I don't believe the truth is subjective.
Bayesian Approach in Portfolio Management
00:26:10
Speaker
um And i I think, although I, i and i don't don't get me wrong, what I'm not saying is that the actuarial model, even yeah a very good actuarial model, is never the truth.
00:26:23
Speaker
But it is meant be an unbiased, best effort attempt at understanding what the truth is. The truth being, what are the ultimate claim outcomes? and That's the most important part. So if the truth exists and we're trying to model the future to to come closer to that truth, then we're talking about a effectively a kind of a Bayesian process.
00:26:41
Speaker
um and and but in philosophy um bayes a big thing in the philosophy of science bayes and it's only recent years recent decades that this has become a thing the idea that science has its fallibilities just like actuarial science has its fallibilities and what we're doing is we're going to try to incorporate update our assessment of what we think the range of outcomes is and bayes is strictly written in terms of probability Yes.
00:27:07
Speaker
um But but um the Bayesian approach, the idea of constantly updating, you've got prior assumptions, you've got new data and new insight coming in, update your prior, it becomes your posterior, et cetera. And then you repeat that cycle.
00:27:20
Speaker
This is a ah really important part of both general philosophy of science, but also of what I think the actuarial work should be. so roof so So this whole control cycle around portfolio management for me is a Bayesian process.
00:27:34
Speaker
um That process is the one in which we can assert human decision making. um We'll need that to be something which is going to deliver the results of the people that are i making those decisions and it therefore needs to be well-platformed. You can't go chaotically with 18 different pieces of paper or 40 different link spreadsheets say, here's the, you want to have the confidence in it. You'll be one month to the next jumping around with different answers.
00:28:02
Speaker
People will challenge it. The credibility will be shot. yeah so so um So part of the mission is to actually build and convince people not only that portfolio management needs to be done, but well I suppose it tightly needs to be seen to be done, bit like justice.
00:28:16
Speaker
You need to be able to have confidence in the credibility of those outcomes in order to to to make sure that the decision makers are gonna make the right decision, they'll be confident about the ability to make the right decisions.
00:28:27
Speaker
And so so part of what we, I believe in with portfolio management is the idea of platforming it.
Need for Robust Analytical Platforms
00:28:33
Speaker
Now the platform, obviously we we we like the idea of selling people, the idea of our software as the platform,
00:28:38
Speaker
but but But by platform, I just mean a robust operating process of which can hang but all the work you need to do. And if you have a single piece of software for that, that's obviously Sybil and that's great.
00:28:52
Speaker
But if you're really confident that you've got the ability to do that, but in a different way, you know very, very well, highly defined spreadsheets. The only people able to operate these spreadsheets are these people and that they're going to come together in a process that that involves the unrighteous and reserving actors and pricing actors.
00:29:11
Speaker
Then that, let's say, is a platform in itself. So the mission is evangelizing about the value of portfolio management. yeah It's identifying, it's bringing a Bayesian approach approach to say we need a control cycle to constantly strive to get closer to the truth.
00:29:34
Speaker
And it needs to be done in a way that is platformed to deliver results to people that can make a difference in business. So that's the mission. Do you know, it's interesting. It's a problem I i have had. i was working for a carrier many years ago as the analyst on our delegated authority schemes.
00:29:52
Speaker
And ah it It was quite a bureaucratic organisation. We had sort of five internal meetings at different levels to agree what we were going to say to the MGAs when we went and met with them.
00:30:06
Speaker
I don't think this as unusual, to be honest. But each of those had their own spreadsheet and analysis. We had so much information. And just like you were saying, it was too it was too much, it was too messy, and people were always asking for more, which was just making kind of this sort of sausage machine bigger yeah and harder to actually control.
00:30:28
Speaker
And just like you said, with the cycle, that couldn't sit well above and kind of go round because it was just always getting bigger and messier. Actually, the control part was very... which is why we had so many meetings. There just wasn't the ability to pull any levers. So it's definitely a problem in that I've
Unified Approach to Data and Insights
00:30:48
Speaker
had. I was CEO last year of ah a big company, and he said to me, um i was talking about civil, concept of civil, and he said, no, you're exactly right, just what you said, Jeremy. He said to me, um I hear this from these people, and this from finance, and this from reserving, and this from yeah people I've tasked with doing as a portfolio, and this from pricing.
00:31:06
Speaker
And i don't know what the truth is. I want a single version of the truth. Now, I think the idea of single version the truth is very important. And I also think you need to recognize that a single version of the truth doesn't mean it this is the truth, but you need this self-correcting math and process and mechanism to do it.
00:31:22
Speaker
Refine it over time. Something everyone can agree on. Exactly. Exactly. And that doesn't just mean compromise. okay I don't think it just means... I don't think it means compromise. so I think it means... um It means recognizing... I talk i talk slightly loosely about reserving, and I am not... um um not I don't mean to mean reserving in any way. Very important function.
00:31:43
Speaker
But... reserving in the eyes of say a cfo is basically an an exercise to ensure that the balance sheet is well shored up so that they can say to their shareholders with confidence that they've got adequate reserves now that there's two elements of that right one those reserves will exist at some kind of level of aggregation that is far, far more aggregated, nowhere near granular enough for any useful decision-making at portfolio level. Yeah, that's right that's right. And the other thing is, and um it probably isn't the mean outcome.
00:32:20
Speaker
It is probably more prudent than the outcome. um yeah I mean, we're allowed say that. But the reality is... think it's true. Prudence is one of the fundamental principles of accounting, right? and And so, of course, you you would much rather be wrong by being over-reserved than by being under-reserved. Let's face it, everyone knows that.
00:32:37
Speaker
And so so so so the idea is not that reserving actually say X and let's say pricing says Y and the simple version of the truth should be average distance between X and Y. I think what we should have is the ability to say, you say X, I say Y. Let's understand why we are different and strip away what we understand to be those differences and converge on something which part of your X is actually my y and done other things on top of it, right?
00:33:04
Speaker
um so So you need that. you need you need that And and um part of our platform, by the way, Sybil, is is a a very important part, is recognizing that the work you do in terms of analysis, IBM, that kind of stuff, is done at an aggregated level because you need credibilitying um incredibly yeah stable data to be able to identify patterns, etc.
00:33:25
Speaker
But once you've got the aggregated bulk numbers of IBM R, say, or also bu bulk rate adequacy, because we will estimate rate adequacy without underlying pricing insights. but Well, we've got a means by which we can estimate rate adequacy more than top down than bottom up, which is quite neat and pretty cool and really enjoyable. and we've got some curve fitting and some algorithms that do that.
00:33:45
Speaker
but But we will have bulk IBM R and bulk rate efficacy. And part of what we do in the software is we allocate that consistently all the time, every single time we do an update. That's then allocated into 1,000 or 10,000 different component parts in that portfolio so that you've got insights at a level that's going to be able make a difference.
00:34:02
Speaker
So so yeah for that part of the platforming, and it's just so important. So the truth is out there. We need to grasp towards that truth. We need to allocate that truth down and within the portfolio.
00:34:13
Speaker
And we need to refine that truth over time so that ah so that people have lots of confidence, credibility, It sounds fantastic, Simon. It's such a brilliant tool, and I'm glad that you're rolling it out there and getting it into people's hands.
00:34:25
Speaker
Yeah, but I think about 15 or 20 portfolios overall, ranging from a few million pounds to over 100 million pounds um that that's that's run through the software. And I think um maybe it does also clients. so and so And we're very grateful to all the clients. They're from small to large, and we're, yeah, it's it's an exciting thing. i've I believe that the success we've had it's not it's not you know i'm not I am not Elon Musk yet. And and so so this hasn't completely taken off. And i and and this is what's actually still fun.
00:34:56
Speaker
We're still evangelizing. it we're still on a mission to convince people that this is the way to go. yeah But I think that we've got enough signs now that we're onto something. There is a wave.
00:35:08
Speaker
It's a bit of a swell. It's not quite a crashing 12-foot roller, but there is a bit of a wave, a bit of a momentum happening. um And so I hope that our modes modest success so far does indicate that we're on something, that this is going to be a thing of the future.
00:35:25
Speaker
And I'd like us to be at the at the forefront of that, defining it um and helping people understand how it can be something they can use for themselves. Brilliant.
00:35:36
Speaker
Well, thank you very much for talking to me this afternoon, Simon. It's been fascinating to learn more about Sibyl and about Calibrand as well. Is there anything you'd like to add? Um...
00:35:47
Speaker
I think there's only one thing, there's probably one more thing to say, and it does relate to culture.
00:35:55
Speaker
I touched on this a few times, right? The idea that you've got biases in modeling, you've got the need to be able to bring different viewpoints in, to be able to, the processes to correct it. I think one thing I would say, and this is a really important cultural aspect, silos.
Against Siloed Structures
00:36:10
Speaker
Silos in businesses, not... grain silos, um yeah you know, the this this sort of cultural silo where I am a pricing actuary, I'm in the pricing actuarial team, I reported to underwriting.
00:36:22
Speaker
I am a reserving actuary, I'm in the reserving actuarial team, I report on finance. um and and where and And I'm an underwriter and i use some actuarial stuff, or I throw data at actors and they throw some results back at me.
00:36:36
Speaker
when you When you've got these relationships between different teams, I think an insurance company is losing awful lot of potential on the table. and i So i I believe strongly in cutting through those silos.
00:36:50
Speaker
um Ideally, you would have people reporting to different towers and things like that. ah Somehow, and insurance an insurer needs to be able to get the best of all those disciplines. Fundamentally, it's it's the reserving discipline, it's the pricing discipline, and it's the analytics discipline.
00:37:05
Speaker
Those three need to come together properly in a process, and they they need to be able to rub up against each other, inform each other, get the best out of them, that's the way that you can actually manage portfolios long-term profit.
00:37:18
Speaker
If you don't have that, you will always have these frictions and plethora of spreadsheets and it's never anybody's job to really put this all together. sos So I think i think the thought I would leave leave people with is if you are in an organization and you find strict boundaries on on your functional reach, then that is not a good situation to be in. and Despite what, you know, your COO might love that, but I'm here to tell you, your COO is wrong. That might be the most efficient way of allocating resources in terms of cost base, but it's definitely not the best way of using your resources to make money.
00:37:56
Speaker
um Yeah, yeah. pray And so so cut down those silos, break through those silos, do additional work, with you, make forward relationships with the best reserving actuary, go out for drinks with him or her, talk about the business, come to get back to the office and work together to get the best of your insight and deliver it into the underwriting process. that's That, I think, get rid of the silos.
00:38:16
Speaker
You've probably done half of the hard work of flourishing in the portfolio management world.
00:38:23
Speaker
Awesome.
Conclusion and Thank You
00:38:24
Speaker
OK, well, thank you very much, Simon. I do agree with pretty much everything you've said and it's been excellent hear from you. and for joining me Thank you very much for giving me your vicinity. ah You're welcome. Have a good rest of your day. Thank you. Bye-bye.