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Karen Clark’s RiskInsight® now offers fully probabilistic loss estimation


Independent catastrophe risk management and modelling firm Karen Clark & Company (KCC) has updated its RiskInsight® platform to offer fully probabilistic loss estimation and modelling tools to insurers, reinsurers and the ILS market.

Post-update RiskInsight, the firms open, global platform for catastrophe risk management, is now capable of generating exceedence probability (EP) curves, probable maximum losses (PMLs) and average annual losses (AALs), according to Karen Clark & Company. KCC said that the platform now provides all of the risk metrics of a traditional catastrophe model plus the unique Characteristic Event (CE) loss estimates which the platform launched with back in 2012.

“RiskInsight is more advanced than the vendor models because it’s an open platform, meaning the components are fully transparent and customizable by the user,” explained Karen Clark, CEO of KCC. “RiskInsight is also the only modeling platform that gives companies CE loss estimates for selected return periods—the flip side of what they get from the EP curves.”

“RiskInsight provides tremendous value because it clearly illustrates our loss potential in two important ways—using the traditional EP curve risk metrics, such as PMLs, along with the newer CE methodology,” commented Locke Burt, President of Security First Insurance Company which uses the platform. “RiskInsight is the only modeling platform that can give us complementary views of risk—the probability of exceeding a certain loss threshold and estimated losses from a hazard perspective for 100- and 250-year events. Seeing both sides of the equation enables us to optimize our portfolio while carefully monitoring our exposure concentrations. This means we are able to maximize profitability and minimize the chances of surprise losses.”

The RiskInsight platform is already used by top 10 property & casualty insurers and global reinsurance firms, as well as a number of participants in the insurance-linked securities (ILS) and catastrophe bond market.

Karen Clark told Artemis previously; “The RiskInsight platform could be very valuable to catastrophe bond portfolio managers for comparing bonds on an apples-to-apples basis and for rolling up the individual bonds to the portfolio view. Each vendor model has its own event set and even when the same historical events are run by the different modelers, the loss estimates can be very different.  This makes it very challenging to compare cat bonds.”

RiskInsight also offers robust event sets and the ability to look at different scenarios and how they might affect a portfolio of risk. This is useful to reinsurers, investors with catastrophe bond portfolios and ILS managers with collateralized reinsurance portfolios.

KCC’s announcement explains:

RiskInsight includes intensity footprints for dozens of historical events so users can conduct detailed “what if” analyses on current exposures. RiskInsight also makes it easy for companies to track hurricanes in real time and superimpose the wind speeds on their exposures to estimate the potential losses. After an event, companies have the necessary data to conduct detailed claims analyses and customize damage functions to better reflect the vulnerabilities of the properties in their portfolios.

Frequency and severity assumptions reflecting near term views of risk can be easily tested in RiskInsight. For example, users have access to the frequency assumptions so they can build their own near term hurricane models based on the latest research without having to wait for the vendors to release new versions. RiskInsight is already being used in the ILS market and brokers can use this advanced platform to provide higher value add services to their clients.

One ILS fund manager using the RiskInsight platform is Fermat Capital Management. Co-founder and managing principal John Seo commented; “We highly value the full transparency of RiskInsight and how all the events, intensities and damage functions are visible. Furthermore, KCC software engineers were able to integrate RiskInsight with our other systems in an efficient manner. RiskInsight enables our research team to conduct sensitivity analyses and investigate how different model assumptions will impact our portfolio—we believe the enhanced transparency of risk is good for the ILS market.”

With the new capabilities the RiskInsight platform can now be used for pricing individual policies and portfolios of policies, according to KCC. As the platform is open it is being used by insurance and reinsurance companies to build proprietary views of risk.

“Our underwriters highly value how RiskInsight illustrates individual company loss potential and the correlations across ceding companies in such a visual and effective way,” said Nicolas Papadopoulo, CEO of Arch Reinsurance, another firm which uses the platform. “RiskInsight provides some unique perspectives and information that complement our internal pricing and management analytics.”

“With the vendor models, users don’t have direct access to the model assumptions so they can only infer what’s inside the box and build their proprietary views using rough levers to adjust and manipulate the model output—an inefficient, brute force process,” said Glen Daraskevich, Senior Vice President at KCC. “Because users can directly access the assumptions in RiskInsight, they can build their proprietary views much more efficiently and scientifically.”

“Companies have asked us how RiskInsight compares to RMS(one), and while they have fundamental differences, the two platforms are not necessarily mutually exclusive,” added Mr. Daraskevich. “The RMS(one) platform is designed to provide one-stop access to additional vendor models so companies can do more blending of third-party models. RiskInsight is designed for companies that want direct access to the model assumptions so they can customize and build their own proprietary models using their own internal expertise and external experts of their choosing. Along with being open and fully transparent, RiskInsight provides a very high benefit to cost ratio and ROI.”

“The real innovation behind RiskInsight is the decoupling of the software from the science,” said Vivek Basrur, Co-Founder and Executive Vice President of KCC. “Sophisticated insurers and reinsurers have their own scientists and other internal experts who understand very well the key components of the catastrophe models. The bigger challenge is having enough software engineers with the necessary skills to build the software platform for tying those components together in a robust way. That’s what RiskInsight delivers along with validated, peer-reviewed reference models by peril region that can be used “as is” or can be customized by our clients.”

“What’s most exciting about RiskInsight is how it enables much faster implementation of new science,” said Ms. Clark. “Under the old paradigm, users have to wait years for new scientific research to be incorporated into the catastrophe models. RiskInsight empowers users to test and implement new science and data as soon as it’s available. This greatly enhances understanding of the risk and creates significant competitive advantage.”

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