Catastrophe risk modelling firm RMS and the Cambridge Centre for Risk Studies (CCRS) at the University of Cambridge in the UK have released a new data schema for 14 different classes of insurance exposure which will enable insurance companies to efficiently manage multiline accumulation and clash risk.
Data Definitions Document v1.0, which covers an estimated $554tn of total insured limits globally, addresses casualty liability, specialty lines, trade credit and surety, agriculture, life and health, and annuity exposure.
It provides a standardised schema which enables insurers to have a consistent method of monitoring and reporting their exposure across multiple different classes of insurance.
The new data standard aims to improve interchanges of data between market players to refine risk transfer to reinsurers and other risk partners, helps in reporting to regulators, and exchanging information for risk co-share, delegated authority, and bordereau activities.
A key objective for the new schema was to identify concentrations of exposure and assess accumulation risk by enabling new types of loss models, as insurers are concerned about several ways that accumulations can occur – through having multiple insurance policies with the same policyholder, having different lines of insurance with clusters of insured value in the same geographical location, and by having ‘clash’ risk from underlying events that impact several classes of insurance in an insurer’s portfolio.
The project demonstrated the need for a data definitions framework for loss modelling by examining three catastrophe scenarios: a severe hurricane hitting the energy fields and marine installations in the Gulf of Mexico; an influenza pandemic that hits life and health insurers; and a geopolitical conflict located in Southeast Asia.
Dr. Mohsen Rahnama, Chief Risk Modelling Officer at RMS said, “Establishing a current and market relevant data standard for managing exposure consistently is a priority for an industry managing accumulations and clash risk more widely. The release of this new data schema will solve risk challenges at an enterprise level across multiple classes of insurance.
“By making this schema open to the market, we hope to enable a new generation of risk model development and improvements across the insurance market in the ability to manage their multiline exposure risk.”
Professor Daniel Ralph, Academic Director of Cambridge Centre for Risk Studies said, “A standardised view of risk is necessary to enable a consistent understanding of exposure across multiple insurance portfolios. Understanding this, the Cambridge research team has engaged deeply with the insurance community to develop data standards that align with current practices and are practical to implement. We are pleased to partner on the development of this data schema with RMS and offer it as an open source document to the insurance and risk management industry.”
CCRS completed a two-year exercise documenting the full range of insurance categories that are available in the market and a classification system for all the assets that they protect. This project, in collaboration with RMS, involved extensive interviews with 130 industry specialists and consultation with 38 insurance, analyst, and modelling organisations.