Actuary Consultant

ISRAEL ASSOCIATION OF ACTUARIES (ILAA) Data Science Training Program

March 2018

Michael DONIO Pierre-Antoine MERLE Partner Actuarial Science Senior Manager Actuarial Science & Data Science Tel: +33(0) 7 63 30 22 70 Tel: +33(0) 6 82 41 48 43 Mail: [email protected] Mail: [email protected]

1 Our Approach

2 Intervention team

3 Sia Partners presentation

CONFIDENTIAL © Sia Partners 2 Synthesis of Sia Partners Proposition

Context Team • The Israeli Association of Actuaries (ILAA) is constantly aiming at the promotion of the professional skills of its members. We would like to propose the Association to offer its Data Scientist / Actuary Lecture | 3 days full time members a training aiming at giving a basic knowledge on data science, and the Senior Manager capacity to start developing actuarial models with these new technologies. 2 Data Scientists / Actuaries Lecture | 3 days full time • The participants are expected to attend a theoretical presentation and to improve Consultant their computing skills on R software. At the end of the training they should be in a position to understand the principal main concepts at stake; in addition, they should be able to manage Data Science projects by themselves. Planning • The main topics covered by the training are detailed below. • Theoretical background: introduction to machine learning methods and algorithms; • 3-days training (including a half a day lecture)

• Computing skills: introduction to R programming language and the relevant • Intervention in June 2018 associated tools, implementation of selected algorithms. Planning

1st Introduction to R (basics) day R environment, data manipulation and basics of programming 2nd Predictive models on R day Machine learning models for classification and prediction & practical cases

3rd Predictive models on R (extension) day Machine learning models for classification and prediction & practical cases

Our strenghts

• Expertise in Data Science • Daily use of R in Machine Learning projects by our consultants • Sia Partners is a State-acknowledged training institute in France, used to provide professional trainings to insurance companies. • Our lecturers are actuaries and data scientists. They have a strong experience in data science applied to insurance

CONFIDENTIAL © Sia Partners 3 Day 1: Data science applications in insurance

Goals Our approach

1 Introduction to data science applications in insurance 1 What are data science applications

• Data sciences projects in insurance 2 Several examples • What is data science applications • Concepts & principles • Open data 3 Exercises • Data manipulation

• Example • Type & characteristics Support of the lecture • Basic operators • Use of variables

1 Slides 2 Introduction to R programming

• Introduction to R environment • Development interface (Rstudio) • User-created packages • Concepts & principles of R programming language • Variables & operators • Type & characteristics of the variables • Basic operators Key points • Use of variables

1 No specific computing knowledge on R is needed

2 The presentation includes many examples and practical applications

3 Each participant is expected to have a computer

CONFIDENTIAL © Sia Partners 4 Day 2 & 3: Predictive models for insurance modelling

Goals Our approach

1 Practical use of machine learning methods for insurance 1 Econometrics models

. General models: 2 Implementation with R . GLM / GAM . Principles / Advantages / Limits / Applications

3 Optimization and model selection . R implementation : . Dedicated packages & functions . Optimization of computing time and memory management

. Analysis of the results & model optimization: . Residuals analysis and metric choice Support of the formation . Variables selection . Handling non-convex optimization problems . Handling interactions 1 Slides 2 Machine Learning Algorithms 2 R scripts . Basis algorithms: . CART / Random Forest / SVM / GBM / Neural network . Principles / Advantages / Limits / Applications

. R implementation : Key points . Dedicated packages & functions . Optimization of computing time and memory management

. Analysis of the results & model optimization: 1 Advanced mathematical background needed . Variance analysis (residuals) and metric choice . Variables selection . Cross-validation 2 The presentation includes many examples and practical applications 3 Selected practical applications 3 Each participant is expected to have a computer . Home Insurance Pricing . Line by line machine learning reserve . Optical character recognition CONFIDENTIAL © Sia Partners 5 1 Our Approach

2 Intervention team

4 Sia Partners presentation

CONFIDENTIAL © Sia Partners 6 Intervention team

Sia Partners will send on the project 3 operational consultants with the following profiles:

• Practical experience in Data Science; • Members of the French institute of actuaries; • Strong IT and programming skills • Members of Sia Partners’ training team

Data Scientist / Actuary • Chief Data Science Officer at Sia Partners Consultant Senior Manager Teacher ( Leading ) Full time • Strong experience on numerous projects • Deep knowledge of market methods 9 years experience

Data Scientist / Actuary • Strong programming and IT skills Consultant Teacher ( Assisting ) Full time • Applied experience on numerous projects 2 years experience

CONFIDENTIAL © Sia Partners 7 Senior Manager Actuarial Science / Data Science

Pierre-Antoine MERLE Consultant in the Actuarial Science team at Sia Partners, Pierre-Antoine is specialized in problematics regarding non-life insurance and Data Science. He currently supervises all the Data Science projects concerning Banking and Insurance at Sia Partners.

Actuary Senior Manager Paris Projects selection

• 9 years experience • Data Science chief at Area risk mapping for auto insurance & Data Capture

Sia Partners An entity willing to change its pricing model for auto insurance concerning the area could not do it because of a too small and too undiversified • French, English portfolio. The innovative solution developed by Sia Partners was to combine their internal data with market data retrieved through web scrapping.

Academic • Data Capture • Actuary, member of the French institute of • Selection of market prices and areas to target ( relevant market actor / similar offer); actuaries • Price extraction through web scrapping; • EURIA – MS in actuarial science • Reconstruction of market area dictionaries through Reverse Engineering.

Sectorial skills • Mixt Area Model • Bayesian approach: theoretical law: geographic market coefficients / credibility: internal entity data; • Reserving: • Specification and calibration of the model: theoretical distribution / observations distribution; • Classic and advanced model • Construction of a mixt area model by computing the ex post law on every postal code; • Piloting strategy • Development and implementation of a zoning tool according to this Bayesian model allowing a regular update of the mixt model.

• Pricing: • Models Pricing models & Data Capture • Construction of area and car dictionaries Sia Partners developed a new innovative approach in order to include competitors’ prices in the explaining variables of a pricing model in order to • Portfolio optimization explicitly measure the influence of a prices augmentation on the clients fidelity.

• Data Science: • Data Capture • Web Scraping • Selection of market prices and areas to target ( relevant market actor / similar offer); • Data Quality and Management • Price extraction through web scrapping; • Model selection • Creation of relevant variables (rank / relative difference with best offer / absolute difference with best offer).

• Reinsurance: • Cancelation modelling • Modelling and pricing • Variable selection (commercial data, pricing data); • Optimization • Benchmark GLM modelling & Random Forest (non linear effects and interactions) • Identification of sensibility to the price on each profile (threshold function) Language skills

• Professional English Other relevant projects Computer skills • AUTO : New product pricing: Model frequency-cost by guarantee and area dictionary construction • SQL / BO • R / SAS / VBA • Data Science: Residuals analysis on auto insurance pricing by areas

• IBNRS / ERMS/ Actupricing • Vehicle liability: Model of extreme claims occurrence (> 70 K€)

CONFIDENTIAL © Sia Partners 8 Arnaud BUZZI – Actuary Consultant

Arnaud BUZZI Arnaud Buzzi works as an actuary consultant within the Actuarial Unit of Sia Partners. He participated in various projects in the fields of ALM modeling, Economic Scenario Generators, Data Science, and Actuarial consultant, financial modeling. Paris In addition to all those experiences, Arnaud participates in various working groups within Sia Partners and with the French 2 years experience Institute of Actuaries, whose goals are to develop financial models for insurance applications.

• French Projects overview • English • Asset Liability Management, Life Insurance and Financial Modeling

• Regulatory reporting automation in Moody’s Risk Integrity: Academic • Redaction of the functional documentation, • Ecole Centrale Paris - Engineer title in financial • Gap analysis to determine the missing data and specification of the new data model, mathematics • Creation of the reporting matrices. • University Paris Dauphine - MS in Actuarial Science • Development of an Economic Scenario Generator: • Choice and implementation of financial models for rates, actions, and real estate, Sectorial skills • Calibration of the models in a market-consistent way in a risk-neutral world, • • Financial skills Development of a user-friendly web interface for the generation of the financial trajectories, • Asset Liability Management • Application to an Asset Liability Management model.

• Quantitative analysis • Actuarial Audit: • Economic scenario generators • Analysis and validation of the financial modeling tools and methods of a major life insurer for regulatory • Financial Risk modelling and monitoring purpose. • Asset pricing • Actuarial skills: • Credit Risk Modeling: • Best Estimate of Liabilities in Life Insurance • Audit of a credit risk model for a european bank and proposition of a new model. • Life insurance modeling • Data Science and Data Capture • Solvency Capital Requirement • Pricing and reserving in Non-Life Insurance • Reverse Engineering of the pricing models of car insurers: • Data Science: • Data retrieval from the online quote service by using web robots, • Data Capture and Data Mining. • Determination of the relevant factors influencing the quote and reverse engineering of the pricing model, • Optimization techniques • Implementation of a web API for results communication. • Model calibration • Capture of interest rates given by banks’ online simulators for loans Computer skills • Retrieving of the data from the online service through web robots, • Implementation of a web interface for results visualization and communication. • Programming: R, Python, C/C++/C#, Matlab, SQL, VBA. • Fundamental research in physical modeling • Publication: Latex, HTML&CSS, Markdown, Office. • University of California Irvine – Earth System Science: • Development of a physical model for ice sheet systems, CONFIDENTIAL © Sia Partners • Coding of a C++ optimization tool for model calibration. 9 Clément BILLORÉ –Actuary consultant

Clément BILLORÉ Clément Billoré works as a actuary consultant within the Actuarial and data science Unit of Sia Partners. He participated in various projects in the actuarial and data science fields. He has a specific knowledge of Data Mining techniques and programming. Actuarial consultant, Paris 2 year experience Work experiences

• French • English Insurance Non-Life Modelization and data science Sia Partners has developed Risk measuring tools based on data science technics.

Academic • Pricing HOI • Framing specifications • EURIA (Brest) – MS in Actuarial Science • Identifying needs • Actuary, member of the French institute of • Product perimeter • actuaries Identifying data sources • Development R model Sectorial skills • Implementation of calculation • • Data Science : Outputs validation • Data Mining • Development and implementation tool • Optimization techniques • Development user interface • Model calibration • Tool documentation • Handover to internal staff

• Pricing: • Pricing Model • Nuclear risk modeling for credit insurance • Portfolio Optimization • Development of a monitoring tool to localize buyers and nuclear power plants • Calculation of exposure by nuclear power plants • Banking actuarial : • Calculation of maximal loss of the insurer • Modelization banking yield • Profit testing • Bale II Personal insurance The entity developpe and use his own asset liability model in life insurance. The liability is developed with his own • Reserving : prospective table. • Classic Model • Stratégie de pilotage • Risk department : Update of liabilities implementation • Statistical studies of portfolio • Study models used Computer skills • Construction of a prospective table • Programming : R, SAS, SQL, VBA • Projection of structural lapses • Projection of cyclical lapses • Publication : Latex, HTML&CSS, Office, JavaScript • Projection of mortality • Back-testing • Calculation SCR impact 10 CONFIDENTIAL © Sia Partners p a g e 1 Synthesis of our proposition

2 Our approach

3 Intervention team

4 Planning & Pricing

5 Sia Partners presentation

CONFIDENTIAL © Sia Partners 11 Sia Partners, a management consulting firm with a global reach

155 1999 x2 M$ Revenue Date created Doubled in growth in 2016 over the last 3 years

20 870 25+ Offices worldwide Consultants Nationalities

> A team with an unparalleled expertise able to deliver > A culture of excellence and high standards for our clients superior value and tangible results for our clients and our team

15% 70% 15% #7 Key clients include 40,000+ 7,000 Strategy Business IT & Digital in Vault Top 10 20% Followers on Assignments since Transformation Strategy Consulting APAC of Fortune 500 LinkedIn our creation list and #18 in companies trust us 10 Sector teams and 11 Service teams Europe Our teams are fully integrated with a global reach

Sia Partners is independent from IT companies and financial audit firms Our project culture is strongly oriented towards expertise and delivering results We have a global reach with integrated teams based in financial centers across the U.S., Europe and Asia

CONFIDENTIAL © Sia Partners 12 10 industries and just as many cross-industry teams

Banking Retail Government Telecommunications Transportation

SECTORS

Insurance Pharmaceuticals Manufacturing Healthcare Energy

Human Actuarial & Change Procurement CIO Advisory Resources Data sciences Management and Sourcing

SERVICES

Operational CFO Advisory Digital CRM Corporate Excellence Transformation Strategy

CONFIDENTIAL © Sia Partners 13 Our publications

Our website Visit us at http://showroom-actuariat.sia-partners.com/ for an overview of our work on data science

Sia Partners Blog The insurance booklets (quarterly)

Regular communication to the market

La Consultation Publique du 27 novembre, un nouveau challenge pour les assureurs ?

Etat des lieux sur la Analyse d’écarts : Impacts et enjeux de réglementation ajustements & cette livraison tardive Pilier 3 QRT nouveaux QRTs

Lectures Trainings

USP Digitalization

Lectures ESG Emerging risks & training ORSA Impact IT

ALM Data Science

Our expertise Examples of project driven by Sia Partners

• Revision of the pricing – Car Insurance • Sia Partners has realized many P&C pricing projects with • Revision of the policy – Home Insurance prestigious clients • Cost model for extreme claims in civil liabilities P&C Pricing • A dedicated team to P&C pricing issues • Revision of multi-risk climatic pricing • Audit of home and car insurance pricing • Our consultants are experts on models for motor • Construction of a risk assessment cartography based on insurance and property insurance internal data and market data – Car & Home Insurance

• Our consultants are familiar with the different data • Predictive maintenance model science methods used in predictive models • Customer segmentation model – Loan insurance Data Science • Our data scientists back every Sia Partners’ interventions • Yield management model on technical and computational aspects • Electric meter Linky project • Dashboarding • A team is specially dedicated to Data Science

• A unique technology to access automatically to a wide • Benchmark of pricing models – car insurance range of (public) competitive prices • Construction of risk evaluation maps based on internal data and market data – Car Insurance • Data Science team in charge of the Data Capture Project Data Capture • Elasticity price model with integration of competition prices at Sia Partners Confidential – Home Insurance • A pioneer project to integrate market data in internal • Analysis of the competitive strength – Home Insurance pricing models

Pay As You Drive tool Machine Learning models visualization Fraud detection via non-supervised methods

Fraud detection through social medias tool Analysis of competitive prices Means of transport analysis

Sia Partners Actuarial Team Core Actuarial Services

Our Actuarial Services team was created in 2011. This Actuarial Expertise team consolidates our actuarial resources previously o Product documentation and product re-engineering following deployed over a diverse range of activities into one distribution regulations (GN16, IDD, PRIIPS) dedicated Actuarial Services Unit o Audit/review of pricing methodologies o Review of claims experience and reserve adequacy o Review of models and hypotheses o Optimisation of asset/liability management As of January 2016, the Sia Partners Actuarial Services o Embedded Value calculation (EEV, MCEV bases) department has: o …  An expanding team – currently 40 actuarial Model Development, Calibration and documentation consultants globally o Development of risk management models (longevity, mortality, lapse)  An active involvement and contribution to thought o Development and calibration of Economic Scenario Generators (ESG) leadership o Valuation of options and complex financial guarantees  Expertise deployed over four areas of competency: o Interim and full year balance sheet projections o Aggregation and quantification of the impact of diversification o …

Our team has extensive knowledge on the mot Perform quantitative assessments advanced actuarial techniques. YOUR OUR through a coordinated and pragmatic CHALLENGES SUPPORT Our firm offers global solutions by taking into approach account actuarial specificities and process implications.

General insurance Life insurance Health & Social protection Data Science

• Creation of new products / • Pricing • Fraud detection models Pricing • Financial modeling • Solvency II • Data capture • Reserving (SI, SII, IFRS) • KPIs production • Support RFPs • CRM • Reinsurance (pricing and • Audit and consulting • Analysis of regulatory impacts • Data Visualization creation of a program)

Transversal

Transformation Regulatory compliance Trainings • Process optimization • Support in implementing regulations • Regulations • Project framing and management • Gap analysis • Valuation • Change management • Framework audit • ALM • Tools

Our areas of support They trust us

Insurance Mutual Insurance Banks companies companies Actuarial    Risk    management Governance    & Strategy

Practical guides Studies

In collaboration with Les Concentrati Echos, study if the In collaboration with on of mutual insurance companies Les Echos, study on the insurance strategy towards seniors evolution of business groups models within the Benchmark on the risk QRT Production Standard Formula Compliance insurance industry Insurance and management and USPs youngsters organization within the context of Solvency II

Quarterly publication Clubs

Produced by the consultants from the insurance practice and proposing a regulatory watch along with a focus on a chosen theme. Operational Risks Club

Compliance Club

Breakfasts

N° 1 : N°2 : N° 3 : N° 4 : Focus on Solvency Digital / N° 5 : Big data Insurance for seniors II work streams Responsible policies Data for Insurance ESG ORSA Data Science Compliance

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