Insurers Attacking Problems in Parallel
Insurance Networking News, May 1, 2009
Much like youth, good looks or money, when it comes to raw computing power, too much is never enough.
This is especially true for insurance actuaries, who are tasked with some of the most horsepower-hungry tasks in the enterprise-pricing, asset and liability analysis and estimating reserve requirements.
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For the latter, actuaries will use stochastic models to estimate the probability distributions of potential outcomes of a certain event, say, for example, the chance a life insurance claim will be paid in a certain quarter. Thus the prominence of multi-day and multi-week modeling runs. Yet, these runs often bump against time constraints. An actuary with a 30-day window to develop reserve calculations may be in trouble if an application crashes, or if he makes a mistake in the model. The small window afforded to re-run the calculation may prove insufficient, especially on a shared system.
Even a seemingly simple simulation can require a surprisingly large number of calculations. For example, if one wanted to calculate the reserves for 30,000 life policies over 30 years, on a quarterly basis using 1,000 scenarios, the total number of outcomes would be 3.6 billion. Done sequentially, allowing one second per calculation, such a problem would take 11 years to complete.
THE LIMITS
Surprisingly, given its computational needs, actuarial software has been more at home on the desktop than in the data center. Although done on linked high-end desktops and workstations, these solutions often struggle to keep up with modeling demands. Two unpalatable choices presented themselves to actuaries: You could either cut the amount of data by running a subset of the number of policies you had originally intended, or you could get more expensive hardware.
Hoping to avoid such a choice, insurers are increasingly investigating distributed and grid computing options as a way to give their actuaries access to greater computing capacity, and to leverage existing processing power in their data centers.
"A lot of the capabilities the actuaries wanted exceeded the abilities of what we had on the desktop," says Chuck Mahon, manager of server management at Cincinnati-based Western and Southern Financial Group. Rather than continuing to add workstations, the company began to look for ways to leverage their data center for actuarial calculations. "Traditionally, actuaries didn't touch the data center much," he says.
Chuck Mahon
With an ever-increasing number of computational scenarios related to variable annuities prompting it to upgrade, Western and Southern began to investigate Windows computer cluster server platform from Redmond, Wash.-based Microsoft Corp., which would enable it to perform actuarial runs on servers. A proof of concept team consisting of infrastructure, application programmers and actuaries from Western and Southern, plus representatives from the company's provider of actuarial software, Seattle-based Milliman Inc., convened in Chicago at a Microsoft Technical Center for a simulation.
Mahon says the simulations in the Microsoft lab were "a home-run experience," that reduced the risk of implementation back in Cincinnati. "We learned how to configure it, and how to rapidly scale it out and deploy it," he says, noting the cluster server platform, since renamed Windows HPC Server, (high-performance computing) provisions against bare model hardware very quickly. "Basically, we learned how to operationalize it."
Now with the product operational, Mahon says jobs that were taking 40 to 60 hours on a group of actuaries' computers are now done in 30 minutes. Moreover, he likes that the product is a utility computing model, enabling actuaries to easily submit jobs to it.
This last feature is no accident, says Jeff Wierer, group manager for Windows HPC Server, Microsoft. When the first HPC product debuted in 2006, it processed jobs in batch mode. Feedback from customers in financial services influenced the development of later versions. As a result, the renamed product is more service-oriented, and sports a Web services interface. "In a batch-oriented world, an actuary would submit a job that would run in a black box, and when it was done, he would get the answer back," he says, noting the new platform's ability to see and manipulate data, while runs are going on. "Now, you can have a spreadsheet open and see results as they come back."
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