August 30th, 2011

Terrorism Risk: How Guy Carpenter Can Help

Posted at 1:00 AM ET

David Flandro, Global Head of Business Intelligence, Paul Knutson, Managing Director, Emil Metropoulos, Senior Vice Present, Julian Alovisi, Assistant Vice President
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Guy Carpenter is uniquely positioned to help clients manage their terrorism risks around the world. Our GC Analytics®  team offers services and solutions that include industry-leading proprietary catastrophe models, actuarial services and capital models. We encourage you to contact your Guy Carpenter representative to review and discuss your modeling and capital needs in more detail.

Among the specific services we offer our clients are:

Alternative Catastrophe Modeling

Guy Carpenter’s Model Development Team, established in 2004, has developed a number of industry-leading proprietary catastrophe models for perils or regions where no other models exist, or where market-wide modeling technology is still not as advanced as Guy Carpenter’s proprietary alternatives.

i-aXs®

Guy Carpenter’s i-aXs data management platform provides a full suite of tools to help insurers translate their data instantly, allowing for faster and better informed decisions. The award-winning platform integrates sophisticated data analysis systems, cutting-edge technology and satellite imagery to provide more efficient management of exposure and loss data. It also provides data mining, analytics and real-time catastrophe information.

i-aXs allows users to select dozens of standard reports or create a custom view of their data. Exposure reports illuminate how and where policies are being written while a loss output view outlines what the models indicate about client exposures. Past and present data can be compared with ease, facilitating a web-enabled data warehouse users can access 24 hours a day, seven days a week. Clients can also visualize their geographic data with our integrated mapping platform so data can be transformed into fully interactive maps.

i-aXs can also assist insurers with accumulation management issues. Its unique accumulator tool calculates concentrations of exposure for perils such as wind, hailstorm, earthquake and terrorism. Unlike other accumulation tools, output is instantly generated in both map and grid formats. Thematically shaded maps and satellite imagery, along with user-friendly reports, provide detailed accumulation information within a user-defined geographic range.

From an underwriting perspective, i-aXs helps clients assess new locations and combine them with existing portfolios to obtain estimates of probable maximum loss (PML) and AAL. RealCat reports (patent number 7,949,548), meanwhile, assist users in monitoring and evaluating potential losses to a portfolio as an event is unfolding. RealCat covers several perils, including hurricanes, earthquakes, wildfires and floods. By combining satellite imagery with streaming hazard data showing precipitation bands, wind speeds and other related details, clients are able to track the potential impact of an event on their portfolios’ locations.

Man-Made Catastrophe Modeling

In addition to the modeling of natural perils, GC Analytics has acquired expertise in modeling man-made catastrophes. This is accomplished through both the use of commercial modeling platforms and the development of proprietary tools. The wide range of services offered covers the assessment of man-made events for conflagration, terrorism, casualty events, pandemic events that may hit a life portfolio and marine cargo accumulations.

Meta Risk® - Capital Model Implementation (Partial or Full)

MetaRisk is Guy Carpenter’s proprietary stochastic reinsurance and capital modeling platform. It is a uniquely powerful, flexible and transparent solution that enables us to model clients’ entire portfolios rapidly, accurately and reliably.

MetaRisk provides a realistic way of modeling reserve risk, which reflects (re)insurers’ own reserving practices. By building a parallel version of a client’s underwriting risk model (gross losses, ceded premium and ceded losses) in MetaRisk, we can undertake comprehensive validation and sensitivity testing. MetaRisk employs sophisticated algorithms that most closely replicate the treatment of secondary uncertainty by RMS so that the platform’s estimation of extreme losses, for example, 1-in- 200-year events, is nearly exactly the same as that produced by the actual vendor model.

MetaRisk’s simulation speed empowers carriers to compare any desired metric for multiple alternative selections for loss frequency and severity. Consequently, they can sensitivity-test their original assumptions around loss ratio, premium growth, underwriting cycle and inflation.

MetaRisk is also able to simulate clients’ underwriting risk (losses and reinsurance) with a sufficient number of simulations within a relatively short timeframe. This allows an assessment of the impact of potential simulation error within the main capital model on key extreme scenarios, such as the 1-in-200-year underwriting result.

Portfolio Management

Guy Carpenter offers multiple tools for clients who are looking to implement portfolio management and enterprise risk management (ERM) strategies. Our tools focus on both natural and man-made catastrophes and we work with clients to tailor the right short-term and long-term solutions.

A key element of portfolio management is the alignment of a firm’s capital management framework with catastrophe modeling output, so returns can be targeted down to the county, postal code or even location level. With this information, a firm can re-underwrite the “worst offenders” in the existing portfolio and target new areas for growth according to defined performance metrics. The portfolio management process is pursued through data management, portfolio assessment and portfolio optimization.

Range of Customized Advisory Services

Guy Carpenter offers deep advisory expertise in areas that many clients will find useful in evaluating their risk exposure. Our rating agency service offers expertise in areas that help clients in their interaction with A.M. Best. The guidance includes support for evaluating current risk tolerances, catastrophe risk appraisal and advice on the interaction between the company and the rating agency. These services are supported by further offerings including capital advisory, strategic advisory, reserve risk modeling, ERM and reinsurance counterparty risk exposure. Our business intelligence unit also publishes regular analyses of industry issues, as well as bespoke research at the request of individual clients.

Actuarial Expertise

Our GC Analytics team’s expertise and industry leading modeling proprietary software can help carriers parameterize their portfolios, supplement their existing data with more from the industry and enhance model performance through additional technical knowledge and capabilities.

GC Analytics teams can also propose a number of tailor-made solutions to assist (re)insurers with their implementation of regulatory legislation, such as Solvency II. These solutions are targeted and specific, ensuring they are achievable and deliver measurable value.

Click here to read additional stories on terror on GC Capital Ideas >>

Click here to read additional stories about i-aXs on GC Capital Ideas >>

Click here to read additional stories about MetaRisk on GC Capital Ideas >>

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