The Games We Play: the Future of DFA Models’ Interfaces

Aleksey Popelyukhin, Ph.D.Vice President, Information Systems & Technology

aleksey@2wrs.com

2 WINGS RISK SERVICES

Dynamic Financial Analysis

Studies the company as a whole Takes into account multiple types of risk Compares results of different strategies Generates distribution of possible outcomes

but1

Dynamic Financial Analysis

is it really Dynamic

2

?

Now that you have your distribution

3

800

815

830

845

860

875

890

905

920

935

950

965

980

995

questions arise

How did I get there?

staying profitable being not so profitable making all sorts of mistakes

3a

800

825

850

875

900

925

950

975

1000

time

Why didn’t I react?

at that point in time at that point in time at that point in time

3b

800

825

850

875

900

925

950

975

1000

time

What could I do?

how to avoid getting into “red zone” what levers do I have which scenarios require actions

3b

800

825

850

875

900

925

950

975

1000

time

Non-dynamic DFA

4

Doesn’t allow analysis of particular scenarios or group of scenarios

Doesn’t allow time-variant strategies Doesn’t’ allow scenario-dependent strategies

In short,All decisions has to be made before simulations.

DFA can be enhanced

4a

If one adds:

Ability to run particular scenario (s) Higher level of details Clearly identified “levers” Time animation Ability to define strategy “on-the-fly”

(as a response to scenario behavior)

Should we start from scratch?

5

We need a computing environment that provides:

High level of details Time animation Interactivity

Welcome to the world of Games!

5

Simulation Games

6

Provide a computing environment with:

High level of details Time animation Interactivity

Similarity is striking!

7

Empire/City/Railroad Building game vs.

Insurance Company management simulation:

Visual Metaphor Functional Metaphor “Gameplay”

Visual Metaphor

7a

Zoning Areas Bulldozing Cost Tall Buildings Cultural Influence Natural Disasters

(fires, earthquakes) etc.

Lines of Business Brokerage Fees Large Losses A.M. Best Rating Natural Disasters

(fires, earthquakes) …

Functional Metaphor

7b

Emperor/Mayor Advisors Progress Monitoring Orders Taxes etc.

Decision Maker CFO/Actuaries/Claims Reporting Actions Taxes …

“Gameplay”

7c

Watch Critical Indicators Check Advisors Reports Make Decisions Intervene Observe Effect in “real” time repeat

Benefits

8

“Game-like” computing environment serves as:

Training ground for Executives Fine-Tuning tool for Strategists Self-Learning program for AI Monitoring paradise for Management Modeling Sandbox for Actuaries

Training

8a

Thinking with Images Making Decisions without any Damage Behavior in case of Disaster

Fine-Tuning

8b

Choosing Success Criteria Refining Strategies Definitions (if..then) Business Processes Assumption Testing

Monitoring

8c

Multiple factors at once “Real” time Visual cues

Dynamic Response

8c

Time is visualized Non-linear strategies Feedback

Reserves Prices Investment

Implementation

9

Starting with the existing game Engine

we will get: Rich Interactive Interface Flexible Modeling Environment

we will not get: Industry specific Models Ability to import and constantly update Data

Engine Modifications

9a

Simulate Economy Simulate Company Simulate Correlations Simulate the rest:

Competition Geography Weather Catastrophes

Monitoring

9b

Even if we were able to: Design new Models Collect necessary Data Implement all Algorithms

We still have to decide: Which statistics to calculate Which indicators to monitor Which criteria to use for alerts

Presentation of Analysis Results to the Management of the Company

10

built-in!

Conclusion

end

Inevitably, DFA interfaces will resemble modern simulation game environments.

Everyone will benefit: Actuaries Management Shareholders Policyholders

Real-life examples

P.S.

1. Spatial visualization:

Real-life examples

P.S.

2. Time animation:

Real-life examples

P.S.

3. First Actuarial Game: