Economic Scenario Generation

EMB has considerable experience of producing Economic Scenario Generators (ESGs) for clients. Although ESGs can be useful in just about any financial services industry, our methodology is geared towards the needs of insurers.

ESGs are used increasingly as a proactive tool to help insurers fully understand the risks inherent in both their assets and liabilities.  They enable senior managers to understand the external variables that might affect the profitability and financial stability of their companies so that they can then produce reliable business plans.

Typically, we create ESGs for use in the Internal Capital Assessment process, building in factors relating to the wider economy such as interest rates, price and wage inflation, stock market returns, property returns, exchange rates and unemployment rates.

The number of scenarios produced by our ESGs varies according to the complexity of the exercise. The total may be around 10,000, but could be as high 100,000 or more.

Our parameterisation software ExtrEMB has been tailor-made to assist the calibration of these models, while the ESGs are built in our simulation software Igloo Professional. 

For further information on ESGs, contact james.norman@emb.com