Palisade Corporation: Simulating Multiple Scenarios to Choose the Best Outcome

Randy Heffernan, CEO, Palisade CorporationRandy Heffernan, CEO
In today’s highly regulated and complex insurance industry, the insurance teams have to clearly define and ascertain risks, all while factoring in various probabilities, for better decision making. The need of the hour for the industry is a simple tool that allows the decision makers to steer clear of the investment black hole. With over three decades of experience and a global presence, Palisade Corporation enables organizations to perform advanced risk analysis using their industry-leading Microsoft add-in risk analysis tool @RISK. The tool uses Monte Carlo simulation–a computerized mathematical approach that replaces uncertain values with probability distribution functions. The visibility into the risk and uncertainty in various projects ultimately provides insurers with a range of possible outcomes and outlines the consequences of selecting a particular action.

As an Excel add-in, @RISK is an easy tool to learn and use. It is part of the modeling environment that users have worked in beforehand. Analysts and insurance personnel can use @RISK to create various scenarios and choose from different possible outcomes, and they can do so with minimal training. “@RISK simplifies applications such as premium pricing or estimating reserves for anticipated claims,” says Randy Heffernan, CEO, Palisade Corporation. The investment required to get started with the Monte Carlo simulation is much lower compared to other insurance-related proprietary software tools.

@RISK is part of the analytical toolset called DecisionTools Suite, which focuses on taking the guesswork out of the decision-making process. The toolset consists of the tools PrecisionTree for decision trees, TopRank for “what if” sensitivity analysis, RISKOptimizer for optimization with Monte Carlo simulation, and data analysis tools. All of these tools are integrated within Excel.

Palisade takes a consultative approach to understand their clients’ specific requirements, and provides customized training to expedite value delivery. At the outset, Palisade demonstrates a simulation using a client’s own model to create a more realistic experience and eliminate the critical time wasted in learning to build a model from scratch. In addition, Palisade’s consultanting and custom development teams encourage clients to foster new ideas, perform an in-depth risk analysis, and create simulation models that are tailored to their requirements.

Many industry-leading companies use @RISK to optimize their decision making to manage risks better. For instance, Deloitte uses @RISK to help clients make sensitive choices within the cell captive insurance industry. In these scenarios, insurers allow other companies to ‘piggyback’ onto their licenses to help these companies avoid the prohibitive costs and regulations that are associated with buying their own licenses. One of the most important factors an insurer has to consider before allowing a third-party to create insurance business on their license is the risks they would be exposed to. Hence, professionals at Deloitte risk management have found @RISK to be a powerful tool that enables them to advise clients to make informed decisions in a risky and complex environment.

Foreseeing the distinguished benefits Monte Carlo simulation delivers to the insurance and reinsurance market, Palisade plans to continue to provide software features and services to specifically address the needs of this sector.“We want to enhance our customer’s experience not just by becoming a provider of off-the-shelf tools but also as a partner that provides a comprehensive solution,” concludes Heffernan.