Consider this example: While it is no surprise that the US Gulf Key questions to ask about the system are:
and East coasts can be volatile hurricane zones, new tools enable
• Does it reveal a range of loss estimates?
underwriters to drill deeper to look within potentially affected
counties to see how close insured properties are to the water and to
• Does it show key drivers of overall loss?
quantify the expected loss for risks in the area.
• Does it uncover diversification opportunities?
Though some of this knowledge is available with traditional tools,
• Does it allow custom model development?
the speed of online delivery lets underwriters and risk managers make
more timely decisions. The in-depth data segmentation gives greater
• Does it reveal exposed capital and reinsurance?
insight into appropriate levels of premium collections for policies in
• Does it show how reinsurers, investors and rating agencies might
order to make a profitable business.
view your company exposures?
Insurers can review their policies in order to reduce exposures in a
particular area, or examine a new risk and determine its impact on
Ability to examine reinsurance requirements
their existing portfolio.
Certain reinsurance programmes may be dilutive to a company’s
Underwriters might ask whether a new risk will add to their
capital. Therefore, systems need to be able to examine reinsurance
reinsurance cost. If so, is it a marginal increase? What is the cost of the
requirements, given the exposures and the expected losses from those
capital needed to take on a new risk? Online tools provide powerful
exposures. What is the cost of reinsurance? What is the benefit of
pieces of information for underwriters, helping to answer these
that reinsurance and is it adding to or diluting a company’s capital?
questions and to give a full picture of the cost of specific scenarios.
Location level background
what to demand from online
Knowing exactly where risks are located and what the estimated
delivery of catastrophe data
associated losses are is critical. Location-level information gives the
detail needed, with visualisation available on maps and satellite
Companies looking to purchase or utilise online delivery should
imagery.
consider the following points:
Ease of use
Information on exposures
How is the information organised? How easily can it be accessed?
An online delivery system must identify exposures, include information
Information should be organised and easily accessible so that it can
about where various perils exist—e.g. earthquakes, hurricanes and
be converted for use in decision-making. The tools must also be
tornadoes—and benchmark them against policies in place with respect
intuitive for the user, and focus on the right channel and direction
to specific natural disasters.
for optimal power.
Key questions to ask about the system are:
Conclusion
• Does it aggregate policy data into meaningful measures of
exposure?
The bottom line is: Do you have the intelligence to make faster
and better risk management and underwriting decisions? Providing
• Does it detail important exposure attributes?
cutting-edge technology to clients offers better understanding of
• Does it map geographic exposure patterns?
underwriting levels and more accurate risk analysis. The benefits lie
• Does it inform you of exposure changes over time?
in both process and risk management.
• Does it reveal drivers of exposure?
The information that clients need to be able to get back to their
core business quickly is now at their fingertips. Faster turnaround,
• Does it monitor your exposure accumulations?
modern results, high-rate information and frequent assessment of
exposures all help in day-to-day risk management activities to manage
the bottom line. Through innovation, these are possible today.
Access to multiple models

Insurers should have the ability to access multi-model catastrophe
results. A single model may not be able to fully assess risk, and the
user must rely on more than one estimate to cover a range of values. A
multi-model approach helps improve reliability, eliminating potential Guru Rao is president, product research and development, Aon Re
biases in any single estimate. As models evolve and change, systems Services. He can be contacted at guru_rao@arw.aon.com. Deepak
should be able to help differentiate between the impact of model Badoni is vice president, product research and development, Aon Re
changes versus exposure changes on loss estimates. Services. He can be contacted at deepak_badoni@arw.aon.com.
Bermuda Re/insurance . November 2007 39
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