ALMSim-Pathgenerator: Simulation of Market Scenarios and Contracts

Making the increased market of pension products more transparent is the aim of different national and international initiatives (e.g. AltvPIBv and PRIIPs-Regulations). They have in common to classify the contracts on the basis of key figures derived from the products’ risk profile. Simulations of standardized contracts are used to generate the risk profiles.

The software ALMSim-Path generator, developed by Fraunhofer ITWM, allows the simulation of market scenarios and pension contracts. Therefore, its application helps insurance companies to with meet the legal requirements.

 

Background

Since 1st of January 2017, according to the law for improvement of private retirement provisions (AltvVerbG), all state subsidized private pension products in Germany must be classified with regard to their chance-risk profiles. For every single product, a ‘Produktinformationsblatt’ (PIB) must be provided to present the product’s most important features including the chance-risk class. The German Federal Ministry of Finance (BMF) assigned the task of determining this classification to the Produktinformationsstelle Altersvorsorge gGmbH (PIA).

The realization of the European regulations for PRIIPs is planned for 2018 and requires the pension product providers to describe their products in key information documents (KID)

Both initiatives aim at increasing the market transparency with simple documents (PIB and KID) giving key facts to investors in a clear and understandable manner, covering not only collective investment schemes but also other "packaged" investment products offered by banks or insurance companies.

 

Software ALMSim-Pathgenerator

Fraunhofer ITWM developed the simulation software ALMSim-Pathgenerator to support the pension product provider regarding the product development and placement as well as the calculation of effective costs. The generator serves to create and administrate market scenarios of capital market products.

With the help of a graphical user interface, a data repository can be managed and simulations can be run. The software provides different stock  and interest rate models as well as a variety of different funds, stocks, reserve funds, bonds etc. in the data repository.

The simulation module serves for themanagement of simulations. Different output formats enable a simple integration of the scenarios into subsequent systems. The ALMSim-Pathgenerator can be extended individually by additional components or a module for the simulation of pension contracts.n von Altersvorsorgeverträgen erweitert werden.