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Consistent insurance reporting

The Centre for Risk Studies and RMS develop a new data system to help manage $500 trillion in exposure across classes of insurance.

Consistent insurance reporting

Professor Daniel Ralph

Professor Daniel Ralph

The Centre for Risk Studies (CRS) at Cambridge Judge Business School and risk modelling and analytics firm RMS have teamed up to develop a new method of monitoring and reporting insurers’ exposure across multiple different classes of insurance.

The system unveiled today (19 September) is designed to help insurers manage an estimated $554 trillion in insurance exposure.

The system, known as a Data Definitions Document v1.0, addresses 14 different classes of insurance exposure – including casualty, trade credit and surety, agriculture, and life and health.

The document follows a two year project by CRS, in collaboration with RMS, to document the full range of insurance categories available in the market along with a classification system for all the assets they protect. This project involved extensive interviews with 130 industry specialists and consultation with 38 insurance, analyst, and modelling organisations.

The new data standard will improve interchanges of data between market players to refine risk transfer to reinsurers and other risk partners, and will help in reporting to regulators. A key objective was to identify concentrations of exposure, and to assess accumulation risk by enabling new types of loss models.

The two year 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.

“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,” said Dr Mohsen Rahnama, Chief Risk Modelling Officer at RMS. “The release of this new data schema will solve risk challenges at an enterprise level across multiple classes of insurance.”

Professor Daniel Ralph, Academic Director of the Centre for Risk Studies added: “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.”