RAA: My conference experience and the drive to modern reinsurance accumulation management

Having recently just spent two and a half days at the excellent Reinsurance Association of America (RAA) Cat Risk Management Conference in Orlando (February 24-27) together with some of the brightest exposure management practitioners in the market, I was struck by the passion, knowledge and desire to solve some of the issues facing the market today. 

The breadth and understanding of the subject matter at the conference get better and better each year. I feel I'm well placed to have this opinion as I have seen the progression—I attended the first RAA ‘Cat School’ in 2004. The talent that has entered the insurance industry via exposure management is amazing, I am proud to have been a part of it.

One of the biggest changes I saw at this year’s RAA Cat Risk Conference was that ‘non-nat-cat’ now runs alongside ‘nat-cat’ in every conversation, from cyber, terror, marine, or casualty exposures. Exposure managers give these risks high priority, but they present unique challenges. Most of the issues come down to our old friends: a lack of data and limited compute power to run analytics.

The brightest minds have a clear vision about the types of analytics required, but the technology currently used gets in the way of what’s possible, particularly so for reinsurers where data volumes present operational restrictions.

Exposure management has two perspectives: deterministic (exposures/scenarios) and probabilistic (models), each important in creating a three-dimensional view of risk. On the probabilistic side, Exceedance Probability (EP) curves are vital but a little opaque, while deterministic analysis provides the depth and transparency to see what is behind the model curves.

I’ve found that vendor exposure management applications have helped address many insurance market needs. In contrast, reinsurers have been left to fend for themselves, often having to rely on building in-house solutions or workflows.

Importance of being 'cloud-native'

I’ve been told that most vendor applications today are not ‘cloud-native’ meaning that they aren’t engineered to take advantage of the cloud’s scalability and modularity. As data volume and variety grow, applications can lose their ability to run a single reinsurance accumulation or detailed analysis.

At RAA, I heard many stories from reinsurers about how they are trying to tackle these data challenges and the creative, ingenious, but complex ways to improve the granularity and speed of analysis. Despite their best efforts, they all struggle with scaling their compute, lacking the horsepower to make solutions usable in a daily working environment and to meet the ever-growing demand for exposure analytics.

We presented our ExposureIQ™ exposure management solution for reinsurers at RAA. As ExposureIQ runs on the ‘cloud-native’ Moody’s Intelligent Risk Platform™ (IRP), it can run analysis at scale, billions of locations in minutes/hours.

This means event footprints can be run across a reinsurance portfolio (hundreds/thousands of cedants and thousands of layers) in minutes or you can run geospatial zones at varying Probable Maximum Loss (PML) levels—I call them ‘PML Sliders,’ to provide a different view of the risk which is very straightforward to create and explain.

The audience was particularly impressed by a workflow involving a spider analysis run on a global scale for a terrorism reinsurance portfolio. This readily available capability to generate 500-meter accumulations across a terrorism portfolio typically takes weeks of work. Regular, comprehensive accumulation analyses increase risk understanding and transparency, to help reduce uncertainty. 

Making big system changes can be daunting as you have to keep the ‘lights on’ while rolling out new improvements. The Intelligent Risk Platform has been designed to help reinsurers transition from using existing workflows to ‘What’s Possible’.

For example, suppose you are using Oasis Open Exposure Data (OED) schema or Verisk/AIR’s Catastrophe Exposure Database Exchange (CEDE). In that case, the platform automatically maps those schemas to Exposure Data Modules (EDM) when uploaded. This eliminates a major step in consolidating all your cedants into a single database, bringing you one step closer to managing all your cedants in a single workflow, and in a fraction of the time.

The feedback from practitioners at RAA on the potential of ExposureIQ for reinsurance was super positive as they clearly understood the step change that this application can provide—jobs that can take weeks to perform, if at all, can now take minutes; what’s not to like in that!

To learn more, reach out to me or Luke Norman.