On February 1, I had the opportunity to speak at a panel session entitled “Technology as a Driver for ILS Growth” at the Artemis ILS Conference in NYC. It was a full house, with 350 attendees from across insurance, banking and financial markets. My fellow panelists were Sean Bourgeois, CEO of Tremor Technologies; Yaniv Bertele, Co-founder and CEO of Vesttoo, and Andries Hoekema, Global Head of Insurance for HSBC Global Asset Management. This session was chaired by Tom Johansmeyer, Co-head of PCS Strategy and Development from Verisk Insurance Solutions.
Despite the impact of consecutive years of losses, the insurance-linked securities (ILS) market continues to strengthen and expand to become a significant provider of global reinsurance and risk capital. And as financial instruments become more complex, and competition increases, the ability to successfully adopt new technology will emerge as a differentiator to separate the winners from the losers.
From our panel discussion, we had general agreement on what these technology drivers of ILS growth will be, and we coalesced around five drivers:
Models: Using sophisticated models that run in high resolution to enhance risk differentiation, and pre-compiled, granular risk information for every known risk-exposed asset would represent a game-changer for the ILS industry.
Cloud Adoption: Cloud offers the ability to process huge volumes of data quickly and cost effectively, facilitating high resolution modeling. It also allows more model simulations at shorter run-times. This ability to run more analyses could add significant business value, such as establishing detailed position analytics in advance of any investments.
Data: More data (both structured and unstructured – including text, images, video, voice etc.) and better integration of data across the value chain can drive down expenses, boost net returns and reduce trapped capital.
Artificial Intelligence (AI): AI systems understand natural language and reasoning; and learn at incredible speed. AI has already had significant impact in areas such as healthcare (helping doctors accurately diagnose diseases faster), client engagement (call centers, self-service websites), governance risk and compliance, and financial crime prevention (e.g. anti-money laundering/know-your-customer, surveillance). AI also can recognize patterns in huge data sets (i.e. including data collected by drone) and help improve the claims process.
AI could also be used for augmented intelligence, to level-up underwriting expertise to the highest level across the business.
Blockchain: This emerging technology provides a cryptographically secure form of shared record, with a number of potential use cases that are relevant to the ILS market. These include reducing fraud by sharing fraudulent claims or automating P&C claims with the potential to make this process 3X faster and 5X cheaper.
The panel also talked about the barriers to adopting these technologies including a shortage of skills and government regulation. We also felt that more collaboration across the industry, the adoption of open standards, and the sharing of platforms could be an adoption accelerant.
While the rate and pace of technology adoption are uncertain, it is clear that these drivers will create an opportunity for significant competitive advantage for early adopters. If you would like to continue this discussion, please leave a comment in the box below.