Karen Clark & Co. updates RiskInsight open loss modeling platform

Karen Clark & Company (KCC) has announced the release of a new update to its RiskInsight® open loss modeling platform, which will “make it easier for model builders to create high resolution probabilistic catastrophe models reflecting their own knowledge, expertise and views of risk.”

KCC, a risk modeling, analytics and consultancy firm, developed RiskInsight as “an open global platform for catastrophe risk assessment and management.”

With the release of an RI4 update for RiskInsight, KCC is providing users of the platform with “enhanced global mapping capabilities, more detailed and interactive underwriter and CEO dashboards, and significantly advanced model-building tools.”

“External stakeholders, such as rating agencies and regulators, now expect (re)insurers to take ownership of the risk and not just rely on third party model output,” commented Glen Daraskevich, KCC Senior Vice President. “RI4 is the most efficient platform for companies to fully understand, customize and control their catastrophe model assumptions. Only with the full transparency available in RiskInsight can companies truly verify the credibility of the information driving their loss estimates.”

The latest version of the platform will allow insurance, reinsurance and insurance-linked securities (ILS) firms to generate their own views of risk, by building hurricane and earthquake models for any region in the world, using custom event catalogs and damage functions which the user deems as appropriate for specific peril regions.

Increasingly having the ability to generate your own view of risk is a differentiation for the reinsurance and ILS market and risk modeling firms have been moving towards enabling firms to achieve this.

The update to RiskInsight will enable firms to develop and generate “high resolution probabilistic catastrophe models reflecting their own knowledge, expertise and views of risk,” KCC explained today.

“We’ve already started building catastrophe models on the RiskInsight open loss modeling platform, and RI4 promises to make that process even more efficient,” said Eric Letourneau, Senior Vice President at Australian headquartered insurer QBE Group. “A dynamic global company like QBE requires transparent models and the most advanced tools for our pricing and risk management decisions. It’s still the early stage, but RI4 RiskInsight could represent a significant innovation in the catastrophe modeling space.”

RI4 adds detailed global soil maps and terrain datasets covering the world. Risk modelers can now select scientific intensity formulas deemed most appropriate for a peril region from a dropdown box. This enables a customised and personal view of risk. RI4 includes dozens of earthquake attenuation functions allowing various views on ground motion for all types of seismic sources to be assessed.

An updated financial module has global application and is operational for all peril regions in RI4 as well. Using just an event catalog and set of damage functions a new risk model can be created. KCC says that experts will be able to build and customise new risk models in a matter of weeks with RI4.

The platform also makes it simpler for insurers to refine model damage functions using their own claims data and other information. This is important, in terms of developing and maintaining a personal view of risk as it allows model results to be more closely linked to actual loss experience.

“The catastrophe model damage functions are expressed as the ratio of the financial loss to a property divided by the replacement value of that property,” said Daraskevich. “But each insurer has different insurance-to-value assumptions, policy conditions, and claims handling practices. This means that the damage to a specific property will result in a different claim and loss amount depending on which insurer underwrites the property.”

The platform also features risk analytics that can help underwriters or ILS portfolio managers to better understand correlations within their portfolios, important when considering how new contracts fit within a portfolio or ILS fund.

“Underwriters can generate custom dashboards reports, including interactive maps of exposures and market shares, data quality scores, and dozens of histograms illustrating construction, occupancy, year built, and other metrics. The 100 year Characteristic Event (CE) profiles—unique to RiskInsight—are automatically displayed on the dashboard reports. These profiles enable underwriters to quickly see the correlations in their portfolios,” KCC explains.

Karen Clark, co-founder and CEO of the company, commented on the new release; “We’ve listened very carefully to our clients, and RI4 is designed for modeling experts who want full transparency on model assumptions and the flexibility to build sophisticated custom models efficiently and scientifically.

“We’re extremely pleased and excited to deliver such a powerful innovation and to be working with industry leaders who are ready to implement the new generation of open loss models and risk management tools.”

The shift to provide more flexibility to end-users of risk models, by enabling greater customisation and personalised views of risk to be created promises to enhance the analytics behind insurance and reinsurance underwriting, making decisions better informed.

This benefits both the traditional and alternative sides of reinsurance, with the portfolio based approach of ILS fund managers likely to benefit. As ILS funds and the ILS market grows, the ability to have a personalised view of the risks in the portfolio is likely to add to ILS fund managers ability to differentiate.

The ability to differentiate will bring opportunities to outperform, resulting in a greater choice for end-investors and likely an enhanced ability for managers to create portfolios of risk that perform and meet return expectations.