May 23rd, 2016

Cyber Risk

Posted at 1:00 AM ET

ross_christopher-smChristopher Ross, Managing Director

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As businesses, both large and small, throughout all sectors of industry, become more and more reliant on technology to improve service efficiencies and functionalities, cyber risk has become one of the most pressing public topics addressed in corporate boardrooms and by governments across the globe. The corresponding awareness of a business’s susceptibility to a cyber-attack has grown along with a spate of high-profile attacks. Consequently, cyber risk is now an embedded feature of the global risk landscape, not only as a privacy/network liability, which is where much of the publicity has arisen, but also as a peril affecting traditional insurance lines. Therefore, preventative and post-event remediation are gaining importance as shareholders, regulators and rating agencies are increasingly focused on enterprise risk management activities for cyber risks.

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May 20th, 2016

Week’s Top Stories: May 14 - 20, 2016

Posted at 6:30 AM ET

Guy Carpenter Forms Strategic Alliance to Develop Cyber Aggregation Model: Guy Carpenter & Company announced the formation of a strategic alliance with Symantec Corporation, a global leader in cyber security, to create a cyber aggregation model. The model will include a comprehensive catalogue of cyber scenarios from which insurers can derive frequency and severity distributions to measure the potential financial impact of loss from both affirmative cyber coverages and “silent” all-risk policies where cyber is the peril, but no cyber exclusions exist.

Read the article>>


Stochastic-based BCAR: Do You Understand Your “Capital-print”?: Technology and innovation continue to change the world around us, creating both opportunities and new challenges for the (re)insurance industry. Advances in risk quantification such as predictive analytics and capital modeling, to name a few, are changing the way we underwrite, price and manage risk. Similarly, technology is allowing A.M. Best (Best’s) to advance the analytics of risk supporting its assessment of balance sheet strength. Taking advantage of stochastic modeling technology, the evaluation of risk within Best’s capital model is undergoing a fairly substantial overhaul to broaden the lens used to analyze risk relative to capital. The technology allows efficient production of multiple capital metrics adjusted for a range of risk levels rather than risk represented by just one data point, providing deeper insights into balance sheet strength, risk profile and risk appetite.

Read the article>>


Risk Analytic Tools: Public sector-related data can be expansive, containing census data, property risk characteristics, historical loss information, risk rating matrices and natural hazard event scientific tracking. In order to facilitate packaging the sometimes unwieldy data in a way that is useful for risk decision making, utilizing outside resources to improve data transparency can be valuable. Public sector resources devoted to building tools that measure risks that are perceived as “uninsurable” can unlock private sector funding.

Read the article>>


Fort McMurray Wildfires - Canada: Recent rainfall and cooler temperatures have helped to reduce spread of the wildfire that recently rendered devastating impacts to Fort McMurray, Alberta, Canada. Nevertheless, the fire continues to grow outside the city and has now claimed 2,020 square kilometers (790 square miles), according to media reports. A general trend of cooler temperatures is expected through this week, before another warming trend next weekend.

Read the article>>


Risk Profile, Appetite, and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness: Prior to the recent turbulence in the financial markets, insurers and reinsurers were increasing their use of enterprise risk management (ERM) to make risk and capital management decisions. While this was driven in part by rating agencies and regulators, many carriers began to recognize the value of metric-based frameworks and capital models in evaluating their portfolios.

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And, You May Have Missed…

Escalating Medical Costs: The impact of rising healthcare expenses has been and will continue to be felt around the world, in developed and undeveloped nations alike. Rising healthcare costs are putting a strain on governments worldwide. Nowhere in the world, however, are expenses as high as they are in the United States, where the impact extends into the medical component of workers compensation costs. Although the rate of growth has seen some stability, it still outpaces the US growth rate of inflation. The figure below illustrates that per capita spending in the United States in 2010 was over USD 8,000. A key driver for higher US costs is that it spends more on hospital care and medical specialists. Hospital costs are 60 percent higher in the United States than in other Organization of Economic Cooperation and Development countries. Spending on the use of specialists is more than two times higher. Forecasters believe this trend will increase.

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May 19th, 2016

Risk Analytic Tools, Part II

Posted at 1:00 AM ET

In addition to internal risk management, models are typically used in risk transfer negotiations. Both traditional and alternative risk markets require extensive analysis of portfolios when considering risk transfer. Sharing a portfolio’s standardized model output is critical to imparting the loss potential of a particular portfolio from which risk-capital can be unlocked to support the risk financing needs of a reinsurance buyer. Using technology is critical when partnering governments with the private sector. Whether partnering with developed or emerging economies, these tools bring together the risk knowledge and historical data of the public sector with risk management techniques of the insurance industry. The result is an enhanced understanding of risk that provides stability and attracts partners.

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May 18th, 2016

Risk Analytic Tools, Part I

Posted at 1:00 AM ET

Public sector-related data can be expansive, containing census data, property risk characteristics, historical loss information, risk rating matrices and natural hazard event scientific tracking. In order to facilitate packaging the sometimes unwieldy data in a way that is useful for risk decision making, utilizing outside resources to improve data transparency can be valuable. Public sector resources devoted to building tools that measure risks that are perceived as “uninsurable” can unlock private sector funding.

Continue reading…

May 17th, 2016

Guy Carpenter Forms Strategic Alliance to Develop Cyber Aggregation Model

Posted at 5:34 AM ET

Guy Carpenter & Company today announced the formation of a strategic alliance with Symantec Corporation, a global leader in cyber security, to create a cyber aggregation model. The model will include a comprehensive catalogue of cyber scenarios from which insurers can derive frequency and severity distributions to measure the potential financial impact of loss from both affirmative cyber coverages and “silent” all-risk policies where cyber is the peril, but no cyber exclusions exist.

Continue reading…

May 17th, 2016

Stochastic-based BCAR: Do You Understand Your “Capital-print”?

Posted at 1:00 AM ET

murray_mark-smMark Murray, Senior Vice President

Contact

Technology and innovation continue to change the world around us, creating both opportunities and new challenges for the (re)insurance industry. Advances in risk quantification such as predictive analytics and capital modeling, to name a few, are changing the way we underwrite, price and manage risk. Similarly, technology is allowing A.M. Best (Best’s) to advance the analytics of risk supporting its assessment of balance sheet strength. Taking advantage of stochastic modeling technology, the evaluation of risk within Best’s capital model is undergoing a fairly substantial overhaul to broaden the lens used to analyze risk relative to capital. The technology allows efficient production of multiple capital metrics adjusted for a range of risk levels rather than risk represented by just one data point, providing deeper insights into balance sheet strength, risk profile and risk appetite. The benefit of this overhaul will be a rating that provides greater differentiation among companies, a more informed dialogue around capital versus risk and a more concise measure of “excess” or “deficient” capital. This new lens on capital will significantly influence the way (re)insurers view, measure, communicate and possibly even manage risk.

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May 13th, 2016

Week’s Top Stories: May 7 - 13, 2016

Posted at 6:30 AM ET

Fort McMurray Wildfires - Canada: Recent rainfall and cooler temperatures have helped to reduce spread of the wildfire that recently rendered devastating impacts to Fort McMurray, Alberta, Canada. Nevertheless, the fire continues to grow outside the city and has now claimed 2,020 square kilometers (790 square miles), according to media reports. A general trend of cooler temperatures is expected through this week, before another warming trend next weekend.

Read the article>>


Guy Carpenter Reports on Kumamoto Earthquake, Seismic Risk and Earthquake Cover in Japan: Guy Carpenter & Company released a briefing and analysis of the Kumamoto Earthquake that struck Japan in April 2016.

Read the article>>


The Emerging Risks Quandary, Anticipating Threats Hidden in Plain Sight: Marsh & McLennan Companies’ Global Risk Center has published a report, The Emerging Risks Quandary. Many companies struggle to articulate the precise relevance of global and emerging risks to their business, and are poorly organized to make timely decisions. This report explores what impedes corporate efforts and sets out how companies can blend creativity and pragmatism to look beyond predictable and controllable risks to complex uncertainties that have the potential to generate more than mere volatility in corporate earnings.

Read the article>>


China Risk Oriented Solvency System (C-ROSS): The China Insurance Regulatory Commission (CIRC) is instituting sweeping changes through its three-tiered China Risk Oriented Solvency System (C-ROSS) framework that will dramatically impact how (re)insurers conduct business. It will strengthen capital requirements, risk management and transparency disclosures - bringing China in line with, and in some cases overtaking, global standards. The C-ROSS framework is similar to Solvency II: three tiers focusing on quantitative, qualitative and disclosure requirements.

Read the article>>


Risk Profile, Appetite, and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness: Prior to the recent turbulence in the financial markets, insurers and reinsurers were increasing their use of enterprise risk management (ERM) to make risk and capital management decisions. While this was driven in part by rating agencies and regulators, many carriers began to recognize the value of metric-based frameworks and capital models in evaluating their portfolios.

Read the article>>


And, You May Have Missed…

Meeting the Challenges: Regulatory Advisory: The regulatory issues facing insurers and reinsurers today often require highly specialized expertise that may not be readily accessible to clients - from taking credit for reinsurance on financial statements to complying with regulatory requirements in contract wordings to shepherding new products through the approval process. Guy Carpenter Strategic Advisory℠ has a team of professionals whose deep expertise and knowledge can help companies navigate the regulatory realm.

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May 12th, 2016

The Emerging Risks Quandary, Anticipating Threats Hidden in Plain Sight

Posted at 1:00 AM ET

Marsh & McLennan Companies’ Global Risk Center has published a report, The Emerging Risks Quandary. Many companies struggle to articulate the precise relevance of global and emerging risks to their business, and are poorly organized to make timely decisions. This report explores what impedes corporate efforts and sets out how companies can blend creativity and pragmatism to look beyond predictable and controllable risks to complex uncertainties that have the potential to generate more than mere volatility in corporate earnings.

Continue reading…

May 11th, 2016

Guy Carpenter Reports on Kumamoto Earthquake, Seismic Risk and Earthquake Cover in Japan

Posted at 2:30 PM ET

Guy Carpenter & Company today released a briefing and analysis of the Kumamoto Earthquake that struck Japan in April 2016.

Continue reading…

May 11th, 2016

Unmanned Vehicle Technology as an Emerging Risk

Posted at 1:00 AM ET

Here we review GC Capital Ideas posts on unmanned vehicle technology as an emerging risk and the challenges and opportunities it presents to (re)insurers.

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