Impact of Complex Workflows on Real-Time Event Response (and Exposure Management)
Luke NormanMay 31, 2022
When a potential catastrophic event threatens, exposure managers are on the front line to keep the business informed about potential losses and to identify the impact on insureds and cedants. All eyes are on exposure managers when the business needs regular, near real-time updates on potential losses. Catastrophe risks, such as hurricanes, can be particularly unpredictable, which makes frequent and informed updates mission critical to the business.
Just look at Hurricane Irma in 2017. The initial track saw Irma hitting Florida’s east coast and moving straight into Miami. But Irma carried on westward, missing the east coast and central Florida, and eventually entered the west coast – and avoided major cities.
Behind the scenes, most insurers were frequently assessing the potential impact and adjusting their strategy as the event unfolded. In situations such as this, exposure managers must act fast and make sense of the latest information.
Why is a real-time response becoming so important? It demonstrates to your business stakeholders – from internal senior management to external investors, ratings agencies, and regulators – that you understand the impact of an event and are capitalized to cover it, providing reassurance to the market.
Also, being able to identify potentially impacted areas means that you can proactively reach out to insureds to help mitigate the risk, preventing losses and minimize inconvenience for customers.
Challenges in Establishing the Impact of a Catastrophe
During a catastrophe, the tools used by exposure management teams are frequently put to the test. What becomes apparent is that a patchwork of multiple systems and a reliance on manual work-arounds makes the job even more challenging.
Risk model vendors such as RMS® issue regularly updated footprints that identify the impacted area during catastrophes. When an event footprint arrives, exposure managers are responsible for establishing how the footprint will match up with their portfolios to provide estimated losses.
For many (re)insurers using on-premises modeling systems, when a footprint arrives the first step involves identifying the latest portfolio snapshot for the business and extracting the output through the back end using SQL (structured query language).
What then follows is a series of manual data transformation tasks to feed into separate geographic information system (GIS) tools, reporting templates, or business intelligence dashboards, even if the format requires the information to be dramatically simplified in the process.
All these manual work-arounds, system transfers, and data reformatting tasks take valuable time – as the wider business waits for the latest information. With every transfer or manual step, exposure managers also know that the information could become compromised, meaning that they must double-check the results they provide or make allowances for a margin of error.
Having to be an expert in multiple IT systems, file formats, and technologies, plus remembering to run a complex process correctly, all take time and focus away from the exposure manager’s core expertise: managing the business’s exposure effectively.
Refocusing Exposure Management Teams
Exposure management is such a vital function for any insurance business, which is why these teams should be able to focus on the key insights they can provide. This is a main focus area for RMS, as we leverage the power and potential of the cloud-native RMS Intelligent Risk Platform™ to develop applications designed specifically to support business areas that need effective risk analytics.
With simple, automated, repeatable processes, the RMS ExposureIQ™ application frees up the exposure management team to focus on higher-value analysis. It eliminates the need for manual work-arounds or physical data transfer, ensuring there is no degradation of data quality required to fit a specific data format.
As soon as an event footprint is released by the RMS Event Response team, it is instantly available on the ExposureIQ application – high-quality data for your business stakeholders with no loading or no manual intervention required (Figure 1). And with portfolios, contracts, and reinsurance structures already within the platform, exposure managers go straight to work on establishing how an event will impact a portfolio.
Exposure managers can visually drill into an event to see risk accumulations and hot spots and to establish estimated losses – even net of reinsurance – comparing actual claims against predicted losses to identify property types and locations that drive losses. This allows for insights that shape more profitable future underwriting strategy, rather than focusing on turning the cogs of a complex manual event response process.
Event Response and Forecasting with RMS HWind
Integrated with the ExposureIQ application, RMS HWind takes hurricane event response a step further, providing detailed forecast tracks up to five days ahead of the event. This aids capital requirement planning and business operation areas such as the location and deployment of loss adjusters and claims teams.
Our clients are benefiting from the ExposureIQ application, as so much time and effort is saved by using an integrated application without having to juggle and manage information across multiple systems.
And rather than just producing broad loss estimates, clients that use the ExposureIQ application are exploring what’s behind the losses, running granular footprints that apply different damage factors based on detailed event characteristics. Sharing analysis across an entire organization is simplified, and exposure managers are confident that the analytics are based on the very latest information.
As we head toward another North Atlantic hurricane season, with 21 named storms in 2021, as well as many catastrophic events around the globe, the frequency and intensity of events within a typical year makes exposure management a challenge for even the most agile teams.
The ExposureIQ application has allowed our clients to again focus on their role and their expertise: identify exposure accumulation (and also growth) hot spots to help their companies build the business safely – and to support the tough decisions during an event using effective analytics.
Luke is a Director of Product Management at RMS. He has more than 15 years of experience delivering risk management solutions to both insurance and reinsurance companies. In his role at RMS, Luke is responsible for developing the roadmap for ExposureIQ™, the company’s enterprise-class, cloud-based exposure management application.
Prior to his role at RMS, Luke was Product Manager at AdvantageGo, where he managed the exposure management products Exact and Exact Max. Through this role, he has worked closely with clients across multiple insurance and reinsurance lines of business to understand their exposure management needs and ensure they are met with innovative solutions.
Luke has a bachelor's degree in Mathematics from the University of Nottingham.