Towers Watson Receives Patents for Risk Modeling Technique

March 16, 2012

Towers Watson said it has won two U.S. patents for its financial modeling technique designed to help insurance executives statistically sample and better understand and calculate risk exposures in real time.

The global professional services company said the U.S. patent office has issued the two patents for its Replicated Stratified Sampling (RSS) financial modeling technique for the insurance industry. Both patents (U.S. Patent No. 8,126,747, issued February 28, 2012, and U.S. Patent No. 8,131,571, issued March 6, 2012) cover Towers Watson’s RSS smart modeling technique that is intended to speed up run times for complex insurance calculations and help industry executives better understand risk.

“The insurance industry has been struggling with how to accurately understand all risk exposures in real time while offering products that serve consumers’ needs. A lack of robust, real-time modeling tools has contributed to management’s struggle to fully understand and measure risk exposure,” said Steve Bochanski, a senior consultant in Towers Watson’s Risk and Financial Services consulting group. “We believe our proprietary RSS modeling technique will provide insurers and other financial services companies with a faster and smarter approach.”

The Towers Watson RSS modeling technique uses statistical sampling to measure changes in risk metrics while producing what Towers Watson says are “dramatic reductions” in run time.

Sampling has long been used in other industries, in applications as familiar as television ratings and consumer polls. But in the insurance industry, sampling has not been commonly used in the past, according to the firm.

Bochanski said that the RSS technique offers key benefits over other methods.

“The fact that sampling is already widely used makes this approach easy to understand and explain to users, senior management and external constituencies,” said Bochanski. “In addition, with RSS the user has full control over the balance of speed and precision, and it works with insurers’ existing models and actuarial software,” Bochanski said.

Dr. Jay Vadiveloo, a senior consultant at Towers Watson and professor at the University of Connecticut, who invented the RSS method, said he believes RSS is part of the “next generation of modeling techniques, one that will ultimately simplify the financial modeling process for users.”

Topics USA Market Risk Management

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