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1Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. May 2, 2023
OWNING YOUR VIEW OF RISK IN A CHANGING MARKETMark Cravens – Vice President, Professional ServicesDecember 10, 2015
2Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. May 2, 2023
AGENDA
CONCEPT
IMPACT
ELEMENTS
PROCESS
What does it mean to “Own Your View of Risk”?
Benefits of enabling your view of risk
Key components in building a view of risk practice
Building, evolving, and refining your practice
3Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. May 2, 2023
Introduction
4Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. May 2, 2023
WHAT DOES IT MEAN TO OWN YOUR VIEW OF RISK?
Know Your View Understand your unique business
attributes Clarify and prioritize goals and
challenges Identify practical and effective risk and
business management options
5Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. May 2, 2023
WHAT DOES IT MEAN TO OWN YOUR VIEW OF RISK
Own Your Risk Establish a practice to quantify, qualify,
and manage risk, uncertainty, and volatility– Information development– Analytical and empirical– Interpretation and synthesis
Respect and reflect the variances in prospective business behavior
6Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. May 2, 2023
OaklandFirestorm 1991Insurance Loss: $2.9 billion (2014 dollars)
Source: Aon Benfield
Exposure concentration | Economic variance
7Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. May 2, 2023
NorthridgeEarthquake 1994Insurance Loss: $24.4 billion (2014 dollars)
Vulnerability | Unexpected losses
Source: Insurance Information Institute
8Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. May 2, 2023
World Trade Center 2001Insurance Loss: $43.4 billion (2014 dollars)
Clash | Information response
Source: Insurance Information Institute
9Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. May 2, 2023
-15% -10% -5% 0% 5% 10% 15% 20%0%
5%
10%
15%
20%
25%
30%
RoE in Extreme Catastrophe Years (‘01, ‘04, ‘05, ‘08, ‘11, ‘12)
RoE
in M
ild C
atas
troph
e Ye
ars
(‘00,
‘02,
‘03,
‘06,
‘07,
‘09,
‘10)
Performance vs. Catastrophe Risk
Superiorrisk-reward
performance
Below-averageperformance in benign years
Below-averageperformance in bad catastrophe
years
DEMONSTRATED VALUE
10Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. May 2, 2023
ELEMENTS OF A VIEW OF RISK
DataDevelopment, detail, consistency, exceptions
Quality
Extension/Integration
11Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. May 2, 2023
ELEMENTS OF A VIEW OF RISK
DataDevelopment, detail, consistency, exceptions
Quality
Extension/Integration
ExposureHazard/Risk
Prospective behavior
Accumulations
12Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. May 2, 2023
ELEMENTS OF A VIEW OF RISK
DataDevelopment, detail, consistency, exceptions
Quality
Extension/Integration
CorrelationPerils/Events
Contingent risk
Clash
ExposureHazard/Risk
Prospective behavior
Accumulations
13Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. May 2, 2023
ELEMENTS OF A VIEW OF RISK
DataDevelopment, detail, consistency, exceptions
Quality
Extension/Integration
CorrelationPerils/Events
Contingent risk
Clash
VolatilitySensitivities/Variability
Uncertainty
Business parameters
ExposureHazard/Risk
Prospective behavior
Accumulations
14Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. May 2, 2023
ELEMENTS OF YOUR OWN VIEW OF RISK
Data
Exposure
Correlation
Volatility
All insurance carriers have unique business dimensions…
– Underwriting appetite– Distribution channel– Producer relationships– Coverage forms– Pricing approach– Large loss(es) influence– Claims settlement approach
15Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. May 2, 2023
EXAMPLE APPROACH TOWARDS OWNINGA VIEW OF CATASTROPHE RISK
Stage 1: Current StateData and quality
Exposure management
Modeled risk
Stage 2: Initial ViewUnderwriter experience
Expert opinion (e.g., modeling companies)
Historical industry findings
Stage 3:Additional AnalysesClaims analysis
Sensitivity tests
Multiple models
VIEW OF RISK
16Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. May 2, 2023
EXAMPLE APPROACH TOWARDS OWNINGA VIEW OF CATASTROPHE RISK
Stage 1: Current StateData and quality
Exposure management
Modeled risk
Stage 2: Initial ViewUnderwriter experience
Expert opinion (e.g., modeling companies)
Historical industry findings
Stage 3:Additional AnalysesClaims analysis
Sensitivity tests
Multiple models
VIEW OF RISK
Business BenefitsRisk Selection and Pricing | Capacity Management | Post-Event Insight
17Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. May 2, 2023
INVESTING: ENABLING BUSINESS GOALSGOAL: Access better business more efficiently
DATA EXPOSURE CORRELATION VOLATILITY
Identify superior risk profiles more rapidly
Establish criteria to drive target portfolio performance
Reduce potential for surprises
18Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. May 2, 2023
SummaryOwning your view of riskin a changing market
Escalating Need
View of Risk = Unique Business
Effective Solution
Design Is Key
19Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. May 2, 2023
QUESTIONS? For more information, contact Ryan Neugebauer at [email protected] or [email protected].
