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AXIS Module - MultiState

The AXIS MultiState Module offers an alternative approach to modeling insurance products, including combination and package plans.  It models products in a very flexible way based on a powerful state transition process.  This allows the MultiState Module to offer a collection of features for first-principles modeling of various life and health combination products, including:

  • Up to 50 user-defined states, including explicit modeling of transfers between all states and the payment of distinct benefits to lives in and transferring between each state
  • Distinct assumptions for each state which enables differing assumptions for policies or durations with and without prior claims
  • Both a traditional probabilistic single path approach for faster estimates and a powerful stochastic Monte Carlo random-walk approach to outer loop projections of lives and cashflows which enables precise modeling of path dependent features and experience assumptions

MultiState can be used to model:

  • Traditional Life, LTC, Disability lump sum and monthly income, with various traditional benefits added to those products such as premium waiver
  • Critical illness and specified disease policies including both multiple lump sum benefits at different levels and accelerated payment approaches
  • Accumulation fund based insurance products with LTC or critical illness benefits

MultiState generates detailed monthly cash flow projections as well as full financial statements reflecting reserves calculated using any of the following valuation methods (more methods will be added in future):

  • US GAAP (SFAS60, SFAS97 – limited pay)
  • Gross premium method (Canadian PPM)

Like other liability modules of AXIS, MultiState accepts full seriatim data feeds from AXIS DataLink, integrates projected results seamlessly with both Asset and Reinvestment modules and aggregates with other AXIS module projections up to full company models.  Therefore MultiState is useful for the following purposes:

  • Pricing, product design and risk analysis
  • Valuation at current date
  • Financial Statement projection
  • Projection and analysis of survival statistics on lives in various user-defined states
  • Cashflow projection and testing
  • Surplus adequacy testing
  • Embedded value and appraisal
  • Asset liability management

The new stochastic Monte Carlo random-walk projection capability of MultiState module opens a world of new pricing and risk analysis capabilities for any product design and application where the eligibility for benefits or the actual claim frequency depends on the history of the benefit payments or the health status transition path of the life.  In particular, MultiState will provide a practical and robust foundation for the proposed stochastic approach to valuation of LTC under PBA.

The AXIS MultiState Module will be further enhanced under GGY's usual continuous development process, offering additional flexibility and reporting functionality. Some enhancements currently under development include:

  • Benefit utilization
  • Benefit inflation
  • 1 and 2 Year Preliminary Term Reserves

For more information, please refer to Knowledge Base article 1934: MultiState Module Description .

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