ALMSIM^®-Pathgenerator

The aim of various national and international initiatives (e.g., AltvPIBv, PRIIP Regulation) is to make the wide range of pension products on the German market more transparent for customers. The benefits of capital-forming life insurance products are also increasingly being addressed by national and European supervisory authorities. The common core element is the simulation of capital market scenarios, which serve as a basis for further use in internal models.

The ALMSIM^® Pathgenerator software developed at our institute enables simulations of capital market scenarios and pension contracts. It thus supports insurance companies in implementing statutory and regulatory requirements. The product name ALMSIM^® is made up of the words »Asset Liability Management«, ALM for short, and SIM for simulation.
 

Background

The tax incentives for private pension provision in Germany have led to a wide range of pension products. In order to support consumers in choosing their own pension provision and to improve the protection of investors, the Produktinformationsstelle Altersvorsorge gGmbH (PIA, Product Information Office for Retirement Provision) was founded and the Altersvorsorge-Produktinformationsblattverordnung [Retirement Provision Product Information Sheet Ordinance] (AltvPIBv) was introduced on January 1, 2017. The PRIIP Regulation also came into force on January 1, 2018 (PRIIP stands for Packaged Retail Investment and Insurance-based Products).

The aim of both initiatives is to use information sheets (PIB and KID) to make important features of the product on offer visible to consumers in a compact form, thereby increasing market transparency. As part of our work for the PIA, we determine the risk-reward-class, which classifies the insurance product into one of five possible classes based on potential returns and risks of loss. This allows consumers to select the product that best suits their individual risk preference.

Both national and European supervisory authorities continue to focus on the benefits for customers with further additional requirements. For example, on May 8, 2023, the German Federal Financial Supervisory Authority (BaFin) published Guidance Notice 01/2023 (VA) on Aspects of Conduct of Business Supervision for Savings Products of capital forming life insurance products. This information sheet encourages insurance companies to formulate even more specific return targets for consumers that are reasonably likely to be achieved. Furthermore, with its »Value for Money« initiative, the European Insurance and Occupational Pensions Authority (EIOPA) is aiming to cluster the entire market of insurance products in order to identify products that do not offer a monetary benefit. 

Software ALMSIM^®-Pathgenerator: Our Economic Scenario Generator

Our ALMSIM^®-Pathgenerator was developed to support providers of pension products in questions of product design and placement and reduction in yield calculation. It is used to create and manage market scenarios for capital market products.

An easy-to-use web interface with individual login allows the pathgenerator to be used in all common browsers. As a user, you can create a variety of assets (bonds, stocks, funds, actuarial reserve fund, etc.) and start simulations. Input masks tailored to the individual assets guide you through the parameterization of the assets and models and allow you to compile individual simulations. In particular, the parameters of the PIA stock model – such as the excess return or the volatility of the base stock – can be set as required. Our pathgenerator is therefore an easily accessible and lean version of established economic scenario generators (ESG).