The client – a global insurer – was looking for a partner with an in-depth understanding of the surety insurance business and sound construction sector knowledge, especially the industrial accounting practices and relevant ratios used for financial analysis across geographies.
The client needed an effective credit analysis system to streamline the underwriting process for their surety insurance products.
Additionally, adapting to various underwriting styles across regions was one of the primary challenges. While the US region was more project-focused with more significant data availability and sound surety regulations, others followed a more limit-based funding process, working solely on financial statements with limited recourse options.
At the outset, Xceedance formed a highly skilled team of subject matter experts. With proficiencies in surety insurance and having performed detailed financial analysis for corporations, the team benefited from the addition of aspiring CFAs/fresh post-graduates for data support.
The team then worked closely with the client to understand their specific requirements and develop compre- hensive credit analysis templates for assessing the qualitative and quantitative credit risks of insurers (focused on the construction sector).
Further, Xceedance customized templates to suit data availability for different geographies. The team collab- orated to convert subjective underwriter decision matrices into standardized financial models, enabling peer portfolio comparisons. They leveraged visualization techniques to better present model building blocks and the outcomes.
Some essential tools used throughout the developmental process included:
A third-party data aggregator to automate and expedite data imports for public-listed accounts and develop benchmarks for the specified sectors, helping with classifying ratios (above average, average, below average).
Excel modeling techniques to consolidate the drivers for credit analysis, including, but not limited to, solvency, operating performance, liquidity, and management track records. Additionally, widely used z-scores were embedded into the model to aid decision-making based on credit risk parameters.
A standard Microsoft Word template for sharing results to suggest critical risks along with details around each of the factors including, but not limited to, construction sector nuances, such as overbilling/underbilling trends, related party contracts, contract completion status at the project level, and subcontracting of projects.
Xceedance (www.xceedance.com) is a strategic consulting and managed services provider to insurance companies worldwide. Based out of Bermuda, with offices in the US, the UK, Australia, India, Switzerland, Poland and Liechtenstein, its unparalleled expertise in technology, data sciences and blockchain is highly sought after. Helping insurers launch new products, drive operations, imple- ment intelligent technology, deploy advanced analytic capabilities and achieve business process optimization is the main focus at Xceedance