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Dec 2017

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Modelling and analytics: Building on strong foundations

Source: Asia Insurance Review | Jun 2017

This is an exciting time for the risk modelling and analytics community, says Mr Mohsen Rahnama of RMS. With new modelling and analytics capability, more new and updated models specifically for Asia Pacific can be rolled out. He elaborates RMS’ mission plan, which aims among other things, to deliver cost-effective insights to their clients. 
 
Highlights
  • Companies want models to close the gap on coverage to enable expansion into emerging markets globally; 
  • Communication among insurers, brokers, reinsurers, regulatory and capital markets will be vastly different in the future, especially with regards to data transfer and use of analytics; and
  • By strengthening the link between modelled losses and underlying exposures, the RMS(one) platform enables real-time risk reporting of portfolio metrics, and delivers that data to the underwriting front-line.
 
 
By all measures, the global (re)insurance industry is now more resilient than it has ever been. Yet the pace of change has never been faster, and never has RMS been more committed to our clients’ success, particularly in the Asia Pacific region. 
 
   They need to own their view of risk, which requires us, in turn, to deliver new levels of modelling transparency, configurability and service.
 
   Our clients are also seeking new scientific insights on faster cycles, compelling us to increase our own agility and optimise and scale our development processes. They also want models to close the gap on coverage to enable expansion into emerging markets globally. 
 
   Our customers need more granular and expressive analytics, which allow more data-driven differentiation and more innovative forms of coverage to support their pursuit of opportunity and new classes of business, such as cyber and agricultural risk. 
 
   And the demands are growing for more efficient data management and modelling to deliver cost-effective insights into the heart of increasingly dynamic and analytics-intensive workflows. For our clients, this is a long list of needs. For RMS, it is a mission plan.
 
Responding to the industry’s needs
This is an exciting time for the risk modelling and analytics community. In 2016, RMS released our first suite of high-definition (HD) models including the RMS® Japan Typhoon HD Model, the RMS Europe Inland Flood HD Models, and the RMS® New Zealand Earthquake HD Model. 
 
   This year, we continued the influx of new modelling and analytics capability with more new and updated models specifically for Asia Pacific, including new typhoon and flood models for Taiwan and South Korea, new earthquake models for Vietnam, Singapore, Malaysia and Thailand, and updated earthquake models for the Philippines and Indonesia. 
 
   We also released comprehensive updates to the RMS North America Earthquake models and RMS North Atlantic Hurricane models in RiskLink® 17.0, Risk Assessor, and our Cyber 2.0. Our teams have worked with great dedication to create the models so they meet the current needs of our clients world-wide.
 
Key elements of model and loss uncertainty can now be addressed
With technology and computing power having advanced significantly since the early days of catastrophe models, we now have more capability to address key elements of model and loss uncertainty in a much more systematic way. 
 
   RMS model assumptions undergo an increasingly stringent process of refinement, where actual events, scientific advances, increased data and technological upgrades combine to enhance implementation, improve responsiveness, heighten granularity and ultimately, reflect as accurately as possible the potential risk.
 
   Cloud capacity is constantly expanding and supports vastly superior data processing power, which is delivering a level of granularity that extends into the inner workings of the individual policy. 
 
   The ability to assess data from ground level up is supporting risk assessment at a much higher resolution. And the ability to extend the scientific capability of our models to HD allows a holistic quantification of the risk while addressing the elements of the model and exposure uncertainties. 
 
   Across multiple regions, perils and business units, the combination of HD models and powerful analytics provides a more dynamic assessment of risk, giving RMS more opportunities to differentiate and diversify.
 
Removing barriers
We see how important transparency is to our clients, and are delivering modelling advances that are more transparent. We work with clients to explore the data, to explain the rationale, and to demonstrate the value we deliver.
 
   Communication is another area we are investing in to facilitate the market’s management of risk. Communication between parties across the insurance industry – insurance, brokers, reinsurance, regulatory and capital markets – will be vastly different in the future, especially with regards to data transfer and use of analytics.
 
   Collaboration via a common risk management platform will be needed to manage the efficiency, accurate data collection, and improvements in underwriting workflow processes that will be demanded. It will also enable more robust and informed risk assessments, portfolio rollout processes, and risk transfers. We have also committed considerable investment and resources to model the interconnectedness of risk.
 
Real-time risk reporting for the underwriter
It is this future-gazing that culminated in the 2016 launch of the RMS(one)® platform and 2017 release of Risk Modeler, representing a paradigm shift in modelling capabilities by providing our clients with the functionality, scalability and extensibility to build a fully customisable and integrated view of risk across their whole organisation. 
 
   By strengthening the link between modelled losses and underlying exposures, the RMS(one) platform enables real-time risk reporting of portfolio metrics, and delivers that data to the point of impact – the underwriting front line.
 
   By building an open-source platform, we have evolved our design aesthetic and philosophy to be more client-focused – no longer building “cathedrals” but rather creating solutions that are much more flexible, responsive and fluid. Our clients no longer simply use our models – instead they play a full and active role in their development, helping to future-proof the process and evolve capabilities at a rate which was not previously possible.
 
   We are excited by the future and remain committed to helping our clients in the Asia Pacific region as they evolve into the new market leaders. Following the re-opening of our office in Beijing and a series of Asia Pacific-focused client events planned from July, we look forward to deepening our engagement with clients. 
 
   And as we continue to enhance and develop our platform investment, we will also expand our model development capability, having grown our teams by 20% in the last two years to be able to build the new HD models, while maintaining the existing RiskLink products. A 
 
Mr Mohsen Rahnama is Chief Risk Modeling Officer at RMS. 
 
 
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