InsuranceERM Annual Awards 2022 - UK & Europe
Colin Holmes, (CH) general manager - insurance, at Moody's Analytics, and Michael Steel, (MS) global head of business development, RMS, discuss Moody’s Analytics vision for integrated risk assessment and describe some of the ways the firm is supporting insurers
How are you helping insurers to meet their future challenges?
CH: Having been at Moody’s Analytics for over decade now, I've never been more excited about our future. Let me explain why.
Our strategy is all about helping our customers make better decisions through our integrated risk assessment solutions. Across all the sectors we work in – including government, corporates, banking, as well as the insurance industry – we consistently see that risks are becoming ever more complex, driving demand for better data and analytics to aid a more comprehensive risk assessment.
However, in most of those sectors, while risk needs to be managed, that isn’t the core purpose. For insurers of course, it’s different – risk-taking is the core business. So, within a dynamic and complex risk landscape, there are new opportunities for insurers to serve customers.
In turn, that requires insurers to assess new and changing risks, across areas such as cyber, climate, and ESG. That’s where we can help – with our breadth of capabilities, we are uniquely positioned to support insurers as their partner in risk assessment.
MS: For me, it’s been striking how Moody’s integrated risk assessment vision really aligns with the complex risk landscape faced by insurers today.
The pandemic has shown the interconnectedness of the risks being faced. We saw the direct impact on life and health, the volatility in investment markets, and the wider economic impact on our societies. This initially translated into business interruption claims for insurers, balance-sheet asset volatility, and then into supply chain challenges and inflation. Yet again, this demonstrated that these types of extreme events result in correlations that were outside of the scope of many models and, in turn, the need to improve our understanding of these risks through better data and analytics.
That’s a very broad range of risks and impacts – but when you look at the breadth of capabilities across Moody’s Analytics, we have expertise and solutions in all these areas. This puts us in a unique position to help insurers, and their customers, make better decisions amidst this complexity.
What are the areas that insurers are demanding new risk assessment solutions?
CH: ESG and the impact of climate risk are obviously focal points, for reasons that are very well-established. We have invested significantly in recent years to build capabilities supporting ESG assessment and this is an area we see increasing demand as insurers develop and implement strategies for sustainability, and as regulatory and reporting requirements are introduced. Underwriting is a particular focus right now and we are delighted to be partnering with some leading insurers in this area.
MS: Across the industry, climate change is a key topic. The pandemic highlighted the impact of disruptions to our global connectivity and brought more focus to the unrelated, but internationally significant potential impact of climate change. This focus has been sharpened by the increased frequency of climate related losses from events such as recent wildfires and floods. Our Climate Conditioned models, combining our financial modeling framework with the best climate science consensus, enable clients to better understand the financial impacts of climate change both today and in the future.
CH: And that’s another example of where our complementary capabilities can help insurers to understand risk more holistically. Climate change impacts both sides of the balance sheet – so our teams are bringing together our expertise in climate, natural catastrophes, economic and market risk to offer insurers more integrated approaches to offer insight in this challenging area.
MS: The final area we should highlight is cyber risk. The ever-increasing importance of technology is creating new risks, and potential growth opportunities for insurers. We are continuing to invest heavily in our cyber capabilities and are working with our new colleagues at Moody’s to develop and integrate our products and services, to support insurers as they seek to grow their cyber offerings.
What else is on your plate?
CH: Insurers have a lot on their plate operationally with IFRS 17 and LDTI implementations entering the home straight – so this is a key focus for our delivery teams. This also continues to drive demand for our modelling and software solutions, as the standard requires insurers to look carefully at whether existing capabilities are up to the mark.
MS: Likewise, we continue to focus on enhancing our core modeling offering alongside our investments in technology and particularly our cloud-native applications, such as RMS® Risk Modeler™ and RMS ExposureIQ™. These solutions create a seamless integrated view of risk for an insurer, which is embedded into their core workflows and enables faster, more efficient decision making as the risk landscape evolves.
