A year ago I presented the results of a survey at the 15th Catastrophe Insurance Conference in Asia, on the potential for disruption of catastrophe modelling in the re/insurance industry. The ensuing 12 months has seen a busy period of development in all areas of insurance technology, so it seemed prudent to revisit the findings of the survey to assess what has come to pass.

Timing

As we move into the second year since the survey was run, we note that the 13% who responded that disruption could potentially occur in the short-term have seen some gains.

Established flood modelling outfits like JBA Risk, KatRisk and Fathom continue to process huge volumes of data using High Performance Computing, producing increasingly accurate catastrophe models across the globe. With the decreasing cost of computing power and the increasing quality, resolution and availability of underlying scientific information, this pattern will continue in the near term.

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What is also interesting is that the most popular response – the 2–5 year, medium-term – seems an accurate expectation for developing market-changing products in a complex space. As insurers gear up for transformational technology, the ability for technology firms to implement solutions will increase in the coming years.

Technology

Open modelling and Big Data were the key technologies perceived by respondents as the potential drivers of disruption in the market, and there has certainly been a great deal of activity in this space. The OASIS Loss Modelling Framework continues to develop industry traction through many and varied model solutions, in addition to hosted services through Simplitium – a welcome third-party application.

The use of machine learning and artificial intelligence on volumes of data is emerging through organisations such as Cytora who are powering insurers to profitable risks, improving risk selection and pricing, insurdata, who are addressing the perennial catastrophe modelling challenge of exposure data, and our very own reask who are leveraging machine learning to develop catastrophe risk models on a global scale.

Technology

Similarly, the key science of Remote Sensing – which underlies many aspects of catastrophe risk – was viewed as of significant importance in the survey and has maintained the implementation of modern technologies for earth observation. Companies like Ticinium Aerospace continue to develop services for the catastrophe modelling segment and the broader insurance industry, and this space will will evolve dramatically in the coming years.

Challenge

So, what of the challenges perceived as creating obstacles to the catastrophe modelling space? The outstanding concern from those experts in this field was the role of incumbents and their potential for reluctance in adopting new technological approaches.

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Whilst this no doubt continues to be a challenge for incumbents and start-ups alike, in many ways the inverse is occurring; with a significant number of partnerships evolving in the past 12 months tying big re/insurers with agile technology outfits to develop pragmatic implementations of the latest science. A great example of this is the recent case study between global reinsurer Scor, and technology companies insurdata and KatRisk

And with a raft of successful collaborations, this trend is set to continue with insurance organisations continuing their goal of seeking solutions both internally and externally.

The Future of Catastrophe Modelling

With this persistent interest in the insurtech space, many continue to ask what the potential impacts for the catastrophe modelling field will be. In September this year I will sit on a panel at the London OASIS LMF Conference to discuss “The Future of Cat Modelling” with experts from across the industry.

This platform presents an excellent opportunity to take stock of recent advancements in the technology space, and to look towards the Future of Catastrophe Modelling – I hope many of you will be present to provide support and guidance to this event.

 

About the Author

Nick Hassam is co-founder of technology start-up – reask – and has over 20 years’ experience in the application of technology to the commercial sector, Nick’s work has focussed on the use of spatial science and technology to help the global re/insurance industry better understand the impact of natural catastrophes.

About reask

Our vision is to provide the market with leading-edge risk information that embeds in clients’ business process, distributed via our technology platform. As the view of risk evolves, our service transfers seamlessly into organisations to guide and enhance their catastrophe risk strategy.

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