10 Tips for Effective Governance of Actuarial Models

The goal of a governance framework is to establish the process, ownership and controls in order to ensure the consistent execution of the modeling process, which is proving increasingly important to insurers; here's how to achieve that.

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1. Develop a single set of standards regarding model building and documentation 2. Create a corporate culture in which employees understand the value of and seek to improve governance and controls across all functions 3. Establish a dedicated structure related to the modeling organization, with clear and delineated responsibilities for development, maintenance and change management, including the coordination of user-acceptance testing and the establishment of an inventory of models
4. Define change request procedures for revisions to production models and clearly communicate request prioritizations across user groups 5. Establish protocols for updates/upgrades to the actuarial modeling platforms, operating systems and other systems that support the modeling process, such as spreadsheet programs, including regression testing 6. Controlled and automated attribution testing processes to identify and quantify differences due to system, logic or data updates, which is an even more critical component of model integrity in cases where multiple areas use a common model 7. Establish a prioritization scheme to rank models, or specific components of models, and use prioritization to establish frequency and intensity of reviews
8. Develop a production model 9. Monitor the model users' skills, including training and development/software accreditation 10. Conduct ongoing reviews of models' functionality against new developments

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