The impacts to society from changes in longevity and life expectancy will be wide-ranging and incredibly difficult issues to grapple with. A 2012 International Monetary Fund (IMF) study revealed that if individuals lived three years longer than expected the cost of aging could increase by 50 percent. This translates to 50 percent of 2010 gross domestic product (GDP) in advanced economies and 25 percent of 2010 GDP in emerging economies. Globally that amounts to tens of trillions of US dollars. The United Nations expects the aggregate expenses of the elderly will double over the period between 2010 and 2050. The figure below shows the projected trend of rising life expectancy to continue in all regions of the globe regardless of economic advancement.
Posts Tagged ‘modeling’
Sherry Thomas, Head of Catastrophe Management - Americas and James Burnett-Herkes, Senior Vice President
Model Suitability Analysis (MSA)® consists of a set of standard tests and protocols that benchmark the models against independent reference data for hazard, event frequencies, damage functions, losses and historical experience. These datasets are created by independent and credible third-party research institutions that have expertise in the respective subjects. Rather than reinventing the wheel and developing models that already exist, the MSA approach evaluates the scientific underpinnings of existing models to establish confidence where warranted, and to identify areas of uncertainty. Guy Carpenter aggregates this information into our MSA Knowledge Base, and establishes standard protocols that are efficient to execute and test all models using the same standard procedure to achieve homogeneity and fairness in the process.
Could you afford to find that the portfolio you just acquired in North Carolina is more exposed to hurricane than previously assumed? What if next year’s Category 2 hurricane caused a loss in excess of 15 percent of your policyholders’ surplus? How will the changes in the U.S. Geological Survey National Seismic Hazard Maps impact your exposure to earthquake risk in the central and eastern United States?
As greater understanding of the cyber peril is gained, a chief concern for (re)insurers is risk aggregation. Unlike traditional property insurance where aggregation is monitored by physical locations, insurers are exposed to the possibility of a single attack or a series of attacks either against multiple insureds or a single insured (such as a cloud provider) that could lead to substantial losses across multiple geographies. While a large systemic risk has not yet materialized, it does not mean the risk is not present. The challenging part is that there is limited history and lack of data for this emerging exposure, which makes it difficult for insurers to measure cyber risk and calculate capital needs.
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.
Industry Moves Away From Multi-Model Approach Given Current Market Conditions
Insurers and reinsurers are increasingly adopting a core model strategy based around a detailed assessment of its capabilities, instead of the multi-model or blended approach as investment in modeling capabilities comes under pressure, says Matthew Eagle, Head of GC Analytics® - International at Guy Carpenter.
Mark Weatherhead, Head of Model Development - International
2016 marks the 60th year of the Monte Carlo Rendez-Vous. Since the first event in 1957 the insurance world has changed significantly, with economic and insured losses from natural catastrophes such as floods and hurricanes increasing dramatically.
(Re)Insurers Modifying Their Behavior Ahead Of A.M. Best’s New Ratings And BCAR Criteria - GC@MC Commentary
Industry Accelerates Risk Profile Analytics and Development of Their Own Risk Tolerances and Stochastic Capital Modeling
The launch of A.M. Best’s (Best) new ratings and Stochastic-based Best’s Capital Adequacy Ratio (BCAR) draft criteria became an inflection point for (re)insurers worldwide. The 2016 changes represent Best’s first major overhaul in over 20 years and are leading to a growing number of changes in market behaviors across the company size spectrum. (Re)insurers are assessing their risk and capital management positions in anticipation of the impacts of Best’s new requirements even though the changes will not result in massive differences in its published ratings nor likely become effective until later in 2017, according to Eric Simpson, Managing Director and Mark Murray, Senior Vice President of Guy Carpenter.
Loss reserves are arguably one of the most difficult risks to estimate and monitor. In fact, inadequate pricing and deficient loss reserves have been the leading cause of property/casualty company impairments. According to A.M. Best, from 1969 to 2009 they triggered approximately 40 percent of all impairments - four times more than those emanating from natural catastrophes (1). There are many uncertainties in managing long-tailed, heavily legislated lines of business that can be triggered from emerging risks. Unforeseen inflation and anticipated legislative changes over a 10 to 30 year period present many demands. In order to prepare for emerging risk scenarios, future trends and related uncertainties need to be explicitly identified, contemplated and estimated.
Will Garland, Managing Director
Clearly, we are entering a new phase of technological advances that will bring new exposures that were not present in any historical database. For example, two areas where technology risk has rapidly become apparent are nanotechnology and drones. Chemical technology breakthroughs from nanotechnology involved in making stronger and enhanced materials may have unknown liability outcomes many, many years in the future. Drones and other technological advances remove human input into the machine’s operations.