According to Ian Forwood of NIIT Technologies, flexibility that includes deterministic methods alongside traditional cat models is the way forward for the reinsurance industry. This, he said, was highlighted by Hurricane Sandy.
“Reinsurers often look at different lines of business,” he told Bermuda:Re. “One thing they want to understand is the aggregate exposure across all of their classes to one event. Events like Superstorm Sandy were not previously imagined by the traditional modelling industry. The idea of combining storm and surge to get one result is something that many modellers found quite difficult. NIIT is looking to provide a platform where that is possible.”
By providing plug and play components such as exposure aggregations, geocoding and proximity analysis, and embracing the flexibility to integrate traditional models — allowing underwriters to test on specific portfolios as they relate to multiple perils or even multiple models of the same peril— Forwood believes that NIIT’s Exact Advantage tool could help insurers and reinsurers price risk and prepare for unforeseen events.
He explained: “You have to ask the question: if an event like Superstorm Sandy happens today, what could happen tomorrow? Could I imagine something different? Even bigger, or with a different profile, that is not served by traditional models. You need tools that will help you assess such events and consider the impact on your portfolio.”
New integrated platforms, Forwood said, could help mitigate the increasingly strained relationship between traditional modellers and the reinsurance industry. By allowing underwriters to check their own portfolios against multiple models, risks and severity, Forwood says, flexible solutions that include deterministic methods could help take some of the uncertainty out of black swan events and under-modelled risks and geographies.