October 27th, 2016

Analytics: Fueling Risk-Informed Decisions

Posted at 1:00 AM ET

tim_059_headshot Tim Gardner, CEO of U.S. Operations


Today’s rapidly changing global environment presents insurers with many challenges and opportunities as capital management and risk transfer techniques evolve at an unprecedented pace. Stakeholders, regulators and ratings agencies are deepening their focus on risk management practices, and revolutionary developments in technology, including the Internet of Things and hyper-connectivity, are driving companies to adapt to the challenges that senior management faces to support risk management decisions material to their business.


Today, insurers facing these new challenges and disruptions require the most advanced tools and solutions to convert challenges into opportunities as they pursue profitable growth. The analytic tools companies use should emphasize solutions that align with transparent, supportable decision making. Guy Carpenter continues our commitment to innovation as we invest in the development of sophisticated analytics tools and solutions to meet our clients’ needs around underwriting analytics, portfolio analytics and strategic risk and capital management.


Underwriting Analytics

Insurers increasingly seek expertise and guidance to support underwriting that spurs profitable growth. Entry or expansion into new geographies, markets or products requires profit understanding and proper capital allocation. Pursuit and execution of these opportunities should be supported with full insight into projected profitability and volatility. Sophisticated analytic tools can leverage public and private data sources for evaluating the probable impact that growth strategies - potential new product development, expanded geographic reach or deeper market penetration - may have on profitability and enterprise surplus volatility. Insurers may use predictive analytics for strategy refinement in an array of areas:

  • Assessing rate adequacy  in target markets;
  • Reviewing changes to accumulation risk metrics for a  book of business with potential exposure to catastrophic risk; and
  • Analyzing risk level catastrophe loads when the underwriting strategy is realized through point of sale underwriting.

Portfolio Analytics

With robust portfolio analytics, including advanced actuarial and catastrophic risk modeling, insurers are able to manage portfolio risk with confidence. Notable new portfolio-based models are being used for emerging areas such as casualty catastrophe and cyber risk assessment. Significant advances in sub peril modeling, such as for flood, have also transformed previously non-modeled perils into modeled perils, greatly improving knowledge and underwriting decisions in many regions.

Companies’ active understanding of catastrophe modeling results has become increasingly critical as they are used in a growing array of business decisions. Through model sensitivity analysis, loss validation and comparison of critical model assumptions to academic and other scientific data, companies can now better understand the significant assumptions inherent in catastrophe models. The analytic results provide senior management with the requisite level of confidence to accept, recalibrate, bend or blend the catastrophe model results.

Among  portfolio analyses,   mapping-based visualization, portfolio management and pre/post catastrophe response are each rapidly changing and evolving - a number of new providers of geo-spatial layers, ranging from terror targets to soil composition for earthquake analysis, are offering  better accumulation management support. In the claims response area, new providers of weather data are including live-feeds and offering advanced warning of areas of potential impact. Drones, satellite feeds, crowd sourcing and other new alternatives are now routinely utilized to capture event “footprints.” With the large number of risk management tools available in the marketplace, insurers are increasingly relying on their reinsurance intermediaries to help evaluate these providers and guide their understanding of which solutions are the most credible.

These advances in analytics support the ability to transparently design and optimize reinsurance solutions - Guy Carpenter’s GC AdvantagePoint® is an advanced risk analysis and visualization platform that helps clients translate vast amounts of data to better understand risk exposures and the impact of growth strategies as well as plan and respond to catastrophic events.

Strategic and Risk Capital Management

Insurers who rely on strategic risk and capital management analytics to optimize their return on capital require a proactive capital management strategy that is in line with Own Risk and Solvency Assessment (ORSA), rating agency objectives and/or management’s internal capital adequacy benchmarks. To support this objective, a wide variety of tools and solutions are available to help measure capital adequacy - from deterministic models to licensable enterprise-level dynamic financial modeling solutions that advance a company’s ability to measure risk, profit and capital to optimize returns.

The ability to articulate and integrate risk tolerance guidelines into capital management strategy is a key best practice in this area. With new analytics tools and databases, insurers can develop these guidelines in accordance with industry practices and the expectations of external stakeholders, for example, rating agencies.

Guy Carpenter’s MetaRisk® and BenchmaRQ® are economic capital platforms empowering decision makers with a deeper view of risk drivers. For example, BenchmaRQ serves as an excellent foundation to objectively view asset, catastrophe, pricing and reserve risk relative to peers in order to set proper reinsurance and capital decisions.

Looking Ahead

As we look ahead to 2017, the industry faces many challenges and opportunities. Insurers may continue to encounter significant disruption that requires them to innovate and be nimble, utilizing innovative analytic tools and solutions to help them optimize capital and drive profitable growth. Guy Carpenter is focused on the future and continues to invest in innovative resources and expertise to add client value.

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