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DAT 14: Management of Catastrophe Risk Information

Learn how to collect, manage, and employ risk information to gain a competitive advantage in the insurance industry. Explore the consequences of inadequate data management and discover a solution to optimize risk assessments and decision-making processes. This seminar covers key data considerations, the importance of data resolution, and the use of new technology in data collection.

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DAT 14: Management of Catastrophe Risk Information

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  1. DAT 14: Management of Catastrophe Risk Information Seminar on Ratemaking Chris Zumbrum Senior Consultant March 10, 2000

  2. 6 6 6 6 Management of Catastrophe Risk Information • “In all classes of insurance and reinsurance, the ability to collect, manage and employ risk information is the way that a company will get the edge over its competitors.” • Robert Muir-Wood - RMS Confidential

  3. Overview • Real-life Situation • State of the Data • Possible Consequences • One Company’s Solution • Key data and data resolution considerations • Reviewing and understanding the information collection process • Using new technology to assist in the process Confidential

  4. State of the Data • Actual, hundreds or thousands? • Key locations • Wind/Quake deductibles and limits not captured • No street addresses - zip codes only • Duplicate data entry • No persistency between policy periods • Limited resources at all levels Confidential

  5. Possible Consequences • Pay higher reinsurance premiums • Buy too much or too little reinsurance • Inappropriate decisions made to accept/decline new or existing writings • Inappropriate capital allocations to business units • Inability to secure alternate transfers of risk (CAT Bond Securitizations) • Regulatory agency ratings downgraded Confidential

  6. What to Do? - One Company’s Solution • Establish a single point of data entry • Capture complex location schedules into a central database • Build links to legacy systems Confidential

  7. 6 Key Data to Capture • Policy Structure • Limits/Deductibles • Excess Layers • Facultative Reinsurance • Exposure Values (Limits vs. Replacement Costs) • Street Address • Primary & Secondary Building Characteristics • Modeling Output $ Confidential

  8. Impact of Level of Data Resolution Variation of key parameters within the portfolio The degree to which the portfolio mirrors the industry profile Severity and frequency of local hazards Confidential

  9. Examining the data - taking a closer look... • Analyze data capturing • Front end • Back end • Optimistic vs. Pessimistic assumptions • Avoid naïve generalizations of uncertainty Confidential

  10. New Technology Client servers Faster processors Larger, cheaper storage capacity Internet/Intranet applications (HTML/XML protocols) Old Technology Mainframes Outdated legacy systems Costly programming changes Lack of real-time data Use advances in technology to assist in data collection e Confidential

  11. Underwriting Claims Reinsurance Finance Actuarial Loss Control Meaningful Data is the cornerstone that drives sound business decisions throughout the corporation... CAT Model Data Model Output Other Risk Mgmt Tools and Systems Data Available to Corporation Confidential

  12. An End-to-end Risk Management Solution Underwriting Data Capture Underwriting Rules Analysis & Info. Delivery Portfolio Strategy Centralized Database Risk Concentrations & Growth Opportunities Portfolio Management Confidential

  13. Benefits of a Risk Management Solution • Fully centralized database • Centralized administration of data and applications • Real-time exposure data • No need for imposing data collection projects in field offices • Higher quality/more definable data • Identify drivers of risk • Improve risk selection and pricing decisions • Impact of new business Confidential

  14. Possible Consequences • Pay higher reinsurance premiums • Buy too much or too little reinsurance • Inappropriate decisions made to accept/decline new or existing writings • Inappropriate capital allocations to business units • Inability to secure alternate transfers of risk (CAT Bond Securitizations) • Regulatory agency ratings downgraded Confidential

  15. Summary • Know the consequences • Decide what data to collect • Avoid the pitfalls • Use updated technology to assist in collecting and managing data Confidential

  16. Traditional Practices... • Systems are not always well linked together • Valuable information is either unavailable or inaccessible Confidential

  17. The Solution... An adaptable system to make efficient and consistent business decisions. Confidential

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