Inflation riskĪsked how risk modelling will likely change in future, Alun Marriott, chair of the technology group within Aon's strategy and technology division, says the volume of data is increasing exponentially and the insurance market needs more powerful models to handle it. Steehouwer says insurers are now picking up on the benefits of the dynamic ALM approach, and the required technology is modular and flexible for easier integration into existing technology infrastructures. But another question is how to get insights on the potential future developments of the balance sheet under a wide range of scenarios." He says: "Traditionally, a lot of effort goes into assessing the current balance sheet and corresponding short-term capital requirements. Dynamic ALMīesides the further integration of climate and ESG, Steehouwer expects to see an increasing importance and growing adoption by insurers of what can be called "dynamic ALM", compared to traditional more short-term static interpretations of ALM. From 2023, the two companies also aim to bring new hazard data maps and catastrophe risk models to market, covering flood and wind. In August, Reask announced it was broadening its capabilities to cover flood risk, through a partnership with UK flood risk modeller Fathom. The firm uses physics-driven catastrophe models that enable insurers to better understand how tropical cyclones and windstorms might evolve in various climate scenarios. Understanding the impacts of climate risk is becoming vital for insurers globally, and is requiring a step-change in how catastrophe models perform.Īustralian risk modelling company Reask, for example, is using AI to connect atmospheric hazards with the changing climate. Ortec Finance's head of research Hens Steehouwer says the firm has collaborated with Cambridge Econometrics, a specialist in ESG and economic modelling, to enable its scenarios to incorporate climate risks and opportunities associated with different global warming pathways.Ĭlimate change also has the potential to radically change the frequency and intensity of weather-related risks. Risk and financial modeller Ortec Finance says integrating climate risk and broader environmental, social and governance (ESG) considerations into product development, risk management and investment decision-making, is a top priority for customers currently. Start-up vendors with specialist expertise are stepping in to provide insurers with new products and services, while more established firms are turning to partnerships and collaborations to bring specialist knowledge into their business. There are also a host of emerging threats where sophisticated solutions are being desperately sought, including climate change, inflation and cyber. Technologies such as artificial intelligence (AI) are being introduced to help improve how insurers manage traditional risks, such as natural catastrophes, and perform regular tasks such as pricing, reserving and ALM. The market for risk management and modelling solutions continues to develop in interesting ways. Vendors with corporate statements in this year's InsuranceERM technology guide are: The guide also contains eight corporate statements from leading software solution vendors, describing the systems that insurers use for risk, capital and asset management. This year's InsuranceERM technology guide provides a breakdown of over 50 insurance technology vendors with details of more than 110 products.
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