Our sixth Exceedance conference makes a welcome return to Miami, this time at the waterfront InterContinental Hotel on May 14-17, 2018. The views over the Biscayne Bay, inspiring keynotes, over 75 informative sessions, demonstrations, engagement with experts in The Lab, and networking with 700+ industry professionals are all guaranteed. What else can we guarantee at Exceedance 2018? You will leave Miami with a new perspective on risk management, as we invite you to join us for our most transformative and immersive Exceedance yet.
11:00 UTC Thursday, September 7
Rhett Austell, director – Client Solutions, RMS
In the days leading up to landfall for a major hurricane such as Irma, you will find RMS employees and clients glued to their devices. We are all reading weather blogs, studying RMS HWind snapshots, monitoring Twitter, and sharing each other’s projections and observations on LinkedIn. This is all to get the latest view on a dynamic system – what is the maximum sustained wind? What is the Rmax? Central pressure? What is the integrated kinetic energy?
In such a dynamic situation, it is important to also consider what is static: the concentration of exposure within the hurricane uncertainty cone. In the most general sense, the industry insured loss for such an event is a function of the physical characteristics of the storm and the scale of exposure that is impacted. As has been stated elsewhere on the RMS blog, loss scenarios will vary significantly depending on the concentrations of exposure underlying the event footprint. For hurricanes, a few miles can be the difference between a footnote on a quarterly earnings statement or front page headlines. This was the story last year with Hurricane Matthew after it “wobbled” to the east and spared much of southeast Florida.
Farhana Alarakhiya, vice president – Products, RMS
Hurricane Harvey continues to be top of mind at the RMS offices. On Wednesday, RMS hosted a client webinar where Mark Powell, Tom Sabbatelli and Pete Dailey discussed how we have applied our methodology developed for the RMS U.S. High Definition (HD) Flood Model to provide insights to the extent and severity of the flooding from Harvey, with Houston as our top priority. This effort has resulted in a high-fidelity hazard inundation map which is now available to all RMS clients.
For clients on the RMS(one)® platform who use Exposure Manager, this effort goes one step further. We automatically seed the Harvey hazard layer in the client tenant, to deliver instantaneous access to analytic insights from the U.S. Inland Flood HD Model. This models all sources of flooding across space and time, and can also be used to identify and differentiate locations at risk based on flood extent and severity.
Look around and you see the financial services industry being transformed by a newfound ability to tap into a vast amount of data, right at their fingertips. Where business decisions were reliant on intuition and experience, and transactions underpinned by the strength of relationships, data analytics now drives everything from credit rating to complaint handling, from social media-driven marketing to employee performance monitoring.
Competing in the insurance market through differentiation, and demonstrating knowledge and expertise to a client, are central to so many business strategies in this industry. The client values the insight an insurance business delivers on their exposure which is reflected in their premium. Sometimes, taking the regular model output view of risk is exactly what’s called for. But to demonstrate this differentiated offer, what about a view of risk for a specific class of buildings, or even just one building?
This is a taster of an article published in the second edition of EXPOSURE magazine. Click here and download your full copy now.
Many in (re)insurance recognize that the industry is at a tipping point. Rapid technological change, disruption through new, more efficient forms of capital, and an evolving risk landscape are challenging industry incumbents like never before. EXPOSURE magazine reported that inevitably the winners will be those who find ways to harmonize analytics, technology, industry innovation, and modeling.
“Disruptive innovation” is increasingly obvious in areas such as personal lines insurance, with disintermediation, the rise of aggregator websites and the Internet of Things (IoT). In the commercial insurance and reinsurance space, disruptive technological change has been less obvious, but behind the scenes the industry is undergoing some fundamental changes.
The tipping point, the “Uber” moment has yet to arrive in reinsurance, according to Michael Steel, global head of solutions at RMS. “The change we’re seeing in the industry is constant. We’re seeing disruption throughout the entire insurance journey. It’s not the case that the industry is suffering from a short-term correction and then the market will go back to the way it has done business previously. The industry is under huge competitive pressures and the change we’re seeing is permanent and it will be continuous over time.”
While it is impossible to predict exactly how the industry will evolve going forward, it is evident that tomorrow’s leading (re)insurance companies will share certain attributes. This includes a strong appetite to harness data and invest in new technology and analytics capabilities, the drive to differentiate and design new products and services, and the ability to collaborate. According to Eric Yau, general manager of software at RMS, the goal of an analytic-driven organization is to leverage the right technologies to bring data, workflow and business analytics together to continuously drive more informed, timely and collaborative decision making across the enterprise.
“New technologies play a key role and while there are many choices with the rise of insurtech firms, history shows us that success is achieved only when the proper due diligence is done to really understand and assess how these technologies enable the longer-term business strategy, goals and objectives.” says Yau. Yau also believes that one of the most important ingredients to success is the ability to effectively blend the right team of technologists, data scientists and domain experts who can work together to understand and deliver upon these key objectives.
Looking for Success in this New World
Which factors will help companies stand out and compete in the future? EXPOSURE asked industry experts for their views on the attributes that winning companies will share:
The Race for Millennial Talent: The most successful companies will look to attract and retain the best talent, says Rupert Swallow, co-founder and CEO of Capsicum Re, with succession planning that puts a strong emphasis on bringing Millennials up through the ranks. “There is a huge difference between the way Millennials look at the workplace and live their lives, versus industry professionals born in the 1960s or 1970s — the two generations are completely different,” says Swallow. “ Those guys [Millennials] would no sooner write a check to pay for something than fly to the moon.”
Collaboration is the Key: There are numerous examples of tie-ups between (re)insurance industry incumbents and tech firms, to leverage technology – or insurtech – expertise, to get closer to the original risk. One example of a strategic collaboration is MGA Attune, set up last year by AIG, Hamilton Insurance Group, and affiliates of Two Sigma Investments. Through the partnership, AIG gained access to Two Sigma’s vast technology and data-science capabilities to grow its market share in the U.S. small to mid-sized commercial insurance space.
Blockchain: Blockchain offers huge potential to reduce some of the significant administrative burdens in the industry, thinks Kurt Karl, chief economist at Swiss Re. “Blockchain for the reinsurance space is an efficiency tool. And if we all get more efficient, you are able to increase insurability because your prices come down, and you can have more affordable reinsurance and therefore more affordable insurance. So I think we all win if it’s a cost saving for the industry.”
“The challenge for the industry is to remain relevant to our customers,” says RMS’ Michael Steel. “Those that fail to adapt will get left behind. To succeed you’re going to need greater information about the underlying risk, the ability to package the risk in a different way, to select the appropriate risks, differentiate more, and construct better portfolios.”
For the full article and more insight for the insurance industry, click here and download your full copy of EXPOSURE magazine now.
Watch Video: Eric Yau – Managing Risk is an Interconnected Process
Eric Yau, general manager, software business unit at RMS, said those managing risk should keep in mind that risk selection is part of an overall process that affects capacity and portfolio strategy. Yau spoke with A.M. BestTV at the Exceedance 2017 conference.
This is a taster of an article published in the second edition of EXPOSURE magazine. Click here and download your full copy now.
Farhana Alarakhiya, vice president, products at RMS, writes… In my recent article in EXPOSURE magazine, I was interested in exploring how firms in the insurance sector can move towards building a more analytics-driven organization. Being analytics-driven translates to being an agile business, and in a turbulent market landscape, building underwriting agility is becoming critical to business survival.
There is no doubt we have seen revolutionary technological advances and an explosion of new digital data sources, which has reinvented the core disciplines of insurers over the past 15 years. Many (re)insurers also see big data and analytics (BD&A) as a “silver bullet” to provide competitive advantage and address their current market challenges.
Similar to other industries who continue to invest heavily in BD&A to secure their position and open a new chapter of growth, the insurance sector is also ramping up investment, in open BD&A platforms such as RMS(one)®, which is purpose-built for the insurance industry. But although there is a real buzz around BD&A, what may be lacking is a big data strategy specifically for evolving pricing, underwriting and risk selection, areas which provide huge potential gains for firms.
With the opportunity for our industry to gain transformational agility in analytics now within reach, we need to be conscious of how to avoid DRIP, being data rich, but information poor, with too much focus being on data capture, management, and structures, at the expense of creating useable insights that can be fed to the people at the point of impact. Regulation is not the barrier to success either, many other regulated business areas have transformed their business and gained agility through effective analytics.
Please read the full article in EXPOSURE magazine to discover more about the three main lessons insurers can learn from other businesses who have their BD&A recipe just right, but here’s a short summary:
Lesson #1 – Delivering Analytics to the Point of Impact
Being reliant on back office processes for analytics is common for insurers, but doesn’t work for a frontline healthcare worker, for example. Data analysts are rare in this sector, because a healthcare worker has analytics designed around their role, to support their delivery. If you look at a portfolio manager in the insurance sector, they typically work in tandem with an analyst to get relevant data, let alone insight, which compromises their ability to perform effectively.
Lesson #2 – Ensuring Usability
Recognizing the workflow of an analytics user and giving due consideration to the veracity of the data provided to reduce uncertainty is vital. Looking at our healthcare example, analytics tools used by doctors to diagnose a patient’s condition use standardized information – age, sex, weight, height, ethnicity, address – and the patient’s symptoms.
They are provided not with a defined prognosis but a set of potential diagnoses accompanied by a probability score and the sources. Imagine this level of analytical capability provided in real-time at the point of underwriting, where the underwriter not only has access to the right set of analytics, they also have a clear understanding of other options and underlying assumptions.
Lesson #3 – Integration into the Common Workflow
To achieve data nirvana, BD&A output needs to integrate naturally into daily business-as-usual operations. When analytics are embedded directly into the daily workflow, there is a far higher success rate of it being put to effective use. With customer service technology, all the required systems are directly integrated into the customer agents’ software for a holistic view of the customer. Using platforms built and designed with open architecture allows legacy systems or your specific intellectual property-intensive processes to be integrated, for access to analytics that allow them to derive insights as part of the daily workflow for every risk they write.
This is a taster of an article published in the second edition of EXPOSURE magazine. Click here and download your full copy now.
Watch Video: Farhana Alarakhiya – The Data Challenge Is Getting It to the Right People
Farhana Alarakhiya, vice president, products at RMS, said insurers are responding to the allure of big data, but must focus on turning voluminous data into meaningful insights. Alarakhiya spoke with A.M. BestTV at the Exceedance 2017 conference.
The quote above is from Conrad Wolfram, the renowned British mathematician, well known as an advocate for the advancement of mathematics teaching. He argues that teaching students how to calculate using computers is more effective and more liberating than teaching calculation by hand. In his talk at TEDGlobal 2010, he describes his four-step process to solve a math problem:
- Pose the right question
- Formulize the question
- Verifying that the computation answered the question
Currently, Wolfram believes 80 percent of math education focuses on step three – computation – and teaching people how to compute by hand. Instead, he proposes “…we ought to use computers to do step three, so students can spend much more effort on learning how to do steps one, two and four – conceptualizing problems, applying them.”
The proper development and utilization of modern computer systems, including hardware and software advances, should enable Wolfram’s vision to come true, with users moving their allocated time away from calculations and process – stage three issues – and moving it to conceptualizing problems and applying the solutions effectively. And through my recent hands-on experience, I am confident that Risk Modeler, powered by RMS(one)®, will truly allow risk analysts to modify that time allocation. I shared my experience of Risk Modeler on the keynote stage at Exceedance, and I invite you to watch the video below.
In 1999, a Legend Was Born
Many of you reading this may not realize it, but RiskLink® celebrates its 18th birthday this September. RiskLink was born in 1999, and for some of you, RiskLink started its cat modeling career before you did. I can remember using RiskLink back then, and it is a testament to the quality of that product that it is still the predominant catastrophe modeling software. I’ve grown up with it, many of us have, and with that kind of longevity and familiarity, it is no wonder that few people even consider or question what can be an elongated process involved in completing an analysis, using this bedrock of catastrophe management.
That process to access your analysis is a lot of work. File management, model profile management, financial perspective re-maps, system restrictions. Wolfram’s assumption looks reasonable, that up to 80 percent of your natural catastrophe modeling time is spent in this process.
We’ll celebrate 18 successful years of RiskLink, but the market is shifting to an embrace of big data analytics. This creates great timing for Risk Modeler. Risk Modeler is built specifically to work with large amounts of data to remove the procedural, tactical component of your work and move it to an efficient and speedy system.
How Would You Use Your Process Time?
This reallocation of process allows you to spend more time using your experience and intuition to conceptualize, understand and guide your business more effectively. You can start to ask and answer questions that anticipate the business’ needs. You can spend more time proactively working on change management with your key stakeholders. You can work more directly with the underwriting teams to understand and differentiate risks more thoroughly.
Risk Modeler is an efficient interface between your insight and experience and the analytical power of cloud-based computing. It allows you to simply ask a question, and it delivers the answer. Mr. Wolfram reminds us that, “…math is not equal to calculating. Math is a much broader subject than calculating…I think of calculating, in a sense, as the machinery of math. It’s the chore. It’s the thing you’d like to avoid if you can, like to get a machine to do.”
Modeling is more than process, which is the chore of risk modeling. I am excited that Risk Modeler is that system capable of completing that chore for you. You can now unleash your energy, creativity, insight, and experience on improving your company, your industry and to help make the world more resilient.
When we started RMS almost 28 years ago, the Specialty and E&S markets were among the first to embrace the benefits of catastrophe modeling. In many ways, I learned about (re)insurance at the knee of the specialty markets, which gave me an appreciation of the sophisticated and myriad ways this market provides coverage and underwrites business. What struck me then, as it does today, is the entrepreneurial nature of the specialty lines. Underwriter-driven and close to their markets, they are constantly boxing-on-their-toes to identify new opportunities to offer innovative coverage and to write profitable business.
Last week, during our annual client conference Exceedance 2017, I welcomed almost 900 participants across clients, partners, and our RMS experts and client teams. During the three-day conference, we convened a Specialty Roundtable with a cross-section of our clients from the U.S. specialty lines market to discuss the priorities for this dynamic sector of the industry.
The discussion was lively and ran across several themes, from identifying new opportunities in today’s market, to the benefits of well-informed stakeholders, to competing on data in a market increasingly driven by agile, real-time analytics.
Here are some highlights from our discussions:
Baking A Bigger Pie
“Specialty lines are all about opportunity.” said one participant, and from the discussion it became clear that the protection gap isn’t just in emerging markets. Even in the U.S., penetration and coverage for earthquake and flood risk is limited relative to the underlying exposures. Another participant stressed the need to move beyond the status quo, stating “It’s not about competing in a zero-sum game; we need to expand the market.” But although it was recognized that the current market has its challenges, one participant remarked that “…within every market there is opportunity.” We also discussed how new RMS models for earthquake and flood can help firms gain new insights to better identify and write quality business to expand the pie.
Educating the Market
Another imperative, one that came through loud and clear during the discussion, is the importance of a well-informed market. Not just for the underwriters, but also upstream with the producers and buyers. The group felt that there continues to be too much focus on using average annual loss (AAL) as the basis for placing individual accounts, with an insufficient understanding of the standard deviations, tail-correlations, and contributory metrics. This is particularly the case for earthquake risk, which is the quintessential tail-risk peril. With the April release of the updated RMS North America Earthquake Model, we’re giving clients a more complete view of the risk, with the ‘tails’ of the exceedance probability (EP) curve playing an even more important role than in the past. We discussed steps RMS is taking to inform key stakeholders, and we will continue to do more to be proactive and educate the entire market.
The Analytic Enterprise
Analytic agility was a constant theme throughout our discussion, with one participant remarking “With analytics, you’re either on the bus, or off the bus.” It was agreed that there is no half-way measure to adopting analytics. All participants emphasized the central role of the underwriter in the risk-decision process, applying their experience and judgement, supported by analytics to make sound decisions. However, there was much discussion that underwriting, portfolio management and analytics need to be increasingly agile and more tightly coupled. Statements such as “I need real-time,” were made and why critical up-to-date portfolio information is needed to be able to proactively manage their book. The importance of dynamic insight was emphasized “…underwriting works in lock-step with the portfolio; you can’t look at one without the other, particularly in this market.” And the need for empowering underwriters with analytics will only grow as “…you can never have enough data,” with the market now “more data-driven than ever.”
Having had hands-on access to the RMS(one) solutions in The Lab at Exceedance, several of the group were pleased to note its apparent benefits, from new exposure management and analytic applications to more flexible representations of contracts and financial structures. “We’re seeing a lot of contracts that are getting more complex, and RMS(one) using CDL (contract definition language) will help.”
It was motivating for me to hear the excitement for our new data and analytics platform, with one member saying “after seeing RMS(one), I’m excited that I can be more innovative.”
Continuing to stay close to what is important for our clients and their markets is a strategic priority for RMS. At a time of great change across the industry, agility is instrumental to mitigating risks and seizing new opportunities, and the specialty markets are at the forefront.
It’s Wednesday, which meant another full day of sessions, presentations, The Lab, a networking event, and more, happening here in New Orleans.
Attendance has been exceptional at Exceedance, and some track sessions have been so popular that we are repeating a few of them. For those of you here in New Orleans, the sessions will repeat on Thursday morning, starting at 10 a.m. Be sure to check the Exceedance app for details.
The main theme of the morning’s general session was a demonstration of how RMS is working to help clients explore and manage new and emerging perils, as well as applying RMS model expertise to long-standing lines. Speakers included Mike Steel, Christos Mitas, Robert Reville, Steve Jewson, and Andrew Coburn.
A few of the highlights of the day’s sessions included:
- Christos Mitas took us deep into what he described as the unique and exceptional world of cyber terror and cyber risk modeling, with insights that included the upcoming (April 2017) launch of the RMS Cyber Accumulation Management System CAMS v. 2.0.
- Robert Reville from Praedicat explored product stewardship and product liability risk, explaining the causes of liability accumulation, how the risk of major technological innovation is not known, and how risk accumulation can go on for years.
- Steve Jewson transported us to India and China, presenting new agricultural risk models – including drought models for four countries. Agricultural risk is one of the top concerns for our clients in Asia-Pacific and Latin America, offering the market exciting growth opportunities.
- Andrew Coburn from RMS and Dr. Hjörtur Thráinsson from Munich Re combined to present the RMS strategy of a single data standard for all lines and classes of insured exposure, as well as opportunities to generate exposure analytics for more business lines, a single client, or a single location.
Our Second Theme – Resilience – Personified.
The afternoon general session focused on resilience, and the exceptional work happening here in New Orleans over the past several years. Paul Wilson began by acknowledging the accomplishments of Build Change, a partner organization to RMS that continues to build resilience in emerging nations.
He then walked the crowd through a brief history of New Orleans – a city that has been built, and rebuilt, on its experience with hurricanes – before introducing keynote speakers Tanya Harris-Glasow of the Make It Right Foundation, and Jeff Herbert, chief resilience officer for New Orleans. The success of the city following Hurricane Katrina stems from the efforts of innovators like them, and their stories of strength, perseverance, teamwork, and inspiration, truly personify the theme of resilience.
The session continued with Dr. Robert Muir-Wood’s discussion on risk modeling and resilience in Louisiana, and concluded with remarks from RMS President Mike Pritula, who spoke on a variety of topics including his commitment to concentrate on RMS clients, and the challenge of embracing the inevitable change that technology is bringing to the catastrophe modeling community.
The Lab is the Hot Spot in New Orleans!
Customer feedback about The Lab continues to be extremely positive – with a lot of great conversations, product demos, and training sessions focusing on the latest developments from Version 17 and Risk Modeler to help customers choose the best routes for adopting new solutions for 2017 and beyond.
Get Your Mojo Rising on at the EP Tonight!
Last night’s well-attended masquerade in The Lab is now a happy memory. And far as we can tell, everyone removed their masks in time for the first general session this morning.
But if you’re here at Exceedance, our legendary “EP” is coming up tonight – offering three tastes of New Orleans in one unique location – Generations Hall, built in the 1820’s and originally a sugar refinery.
With three themes, Jazz Night Club, Mardi Gras, and Louisiana Cajun, be ready to put on your dancing shoes and show us your voodoo.
Thursday is our final day in New Orleans, so please check back tomorrow for highlights and a message from Hemant!