Expert Risk Articles
Risk innovation: New tools and new ways to approach risk mitigation
At AGCS, new innovative tools are in place to predict casualty exposures – “the next asbestos” – that can potentially be dangerous to companies and economies. On the catastrophe risk management front, a new solution supports underwriters by visually informing clients of global exposures and accumulations. And as climate and weather perils become more volatile, Allianz Risk Transfer is offering strategic solutions that help customers confront unpredictable perils.
What are tomorrow’s risk tools?
Four technologies that could transform the way risks are
assessed and insurance claims are investigated and adjusted.
Drones, or unmanned aerial systems (UAS), carrying one or more cameras can provide fast and easy access to damaged locations in remote areas. Both underwriting and claims management can be made quicker and more effective by using such systems to assess risk and survey loss damage. For example, when parts of Tianjin, China were rendered inaccessible after major explosions in 2015, high resolution images taken by drone after the blasts were compared with previous photographs to determine how many vehicles had been destroyed.
Similarly, in the event of a flood, drones can provide the insurer with a visual overview, helping it to quickly alleviate damage and distress to victims and
3D mapping trolleys
Indoor monitoring trolleys can take rapid high definition indoor scans of the interior of buildings. They create visual timelines recording the status of a building over time, allowing claims handlers to compare its condition before and after damage has occurred. An app compares previous scans with what it currently sees, as the user explores the building, and can provide orientation and guidance as well as second tier information in the form of augmented reality meta information about
the building, which is packed into the visual experience. This could allow claims handlers to remotely monitor the inside of buildings, both on a regular basis to avoid damage and contain losses, but also following a catastrophic event
to assess the damage that has been done. The monitoring data can be linked to a map with crucial information about the building, such as the location of
sprinklers, smoke detectors or water pipes.
Thermo cameras are another, albeit more conventional, technology, which are able to detect damage before it actually occurs, thereby reducing costs for both businesses and insurers. Thermography finds many uses in fire protection, search and rescue after a catastrophe, power line maintenance to locate overheating joints and parts, and building construction thermal insulation heat leaks to improve the efficiencies of cooling or heating airconditioning.
The HoloLens is a head-mounted display unit connected to an adjustable, cushioned inner headband, which can tilt up and down, as well as forward and backward. In short it is a mixed-reality device recognizing the environment around itself and overlaying information. The user basically creates their own reality and shapes it through gestures and gaze tracking, which allows sharing visual experiences across a distance.
Identifying the next asbestos
Casualty exposures have the potential to be long-lived and disastrous to companies and economies, alike. Can these risks be modelled, so that the insurance industry can predict and mitigate “the next asbestos”?
US asbestos claims in 1975 cost the insurance industry $71bn, more than the losses incurred by Hurricane Katrina ($61bn) in 2005. Meanwhile, US pollution
claims in 1990 totaled $36bn. 
It isn’t surprising that insurers may want to know what the “next asbestos” event could be? Fracking? Carbon nanotubes? Toxic chemicals in plastics and laminates?
Cyber? Genetically modified organisms (GMO)? Obesity? Cellular wave exposure?
AGCS has partnered with Praedicat, one of the world’s first liability catastrophe modeling companies, to identify and assess future risks using exposure-based foresight analytics and forward-looking models to expose the unforeseeable elements of liability risk.
The ultimate goal of the initiative will be to provide innovative new risk measures and a model for the technical underwriting of unseen or unknown casualty
risks. Predicting technical casualty risk There is a large degree of liability stemming from emerging risks, although just how much isn’t really measured today. Praedicat and AGCS have suggested it could be as much as a quarter to a half of a company’s insurance and reinsurance risk. The approach of the partnership will be to find new ways to visualize and predict technical casualty risk and gain insights on emerging risks and new business opportunities.
Asbestos was once marketed as a great technological innovation that was used in a wide variety of products, ranging from building materials to cigarette filters to
oven gloves to Christmas tree spray-on “snow”.
Then, scientific literature began to build up a case for the potential risk exposures – beginning with an article published in 1924 on the hazards of asbestos dust and
followed by increasing numbers of articles from the 1930s through the 1960s that gradually built up the present day legal mass litigation response towards
In a similar way, today’s risks can potentially beidentified by mining the scientific data and isolating the likely culprits into risk sets and quantifying the results,
based on probability, severity and other forward-looking behaviors.
Forward-looking models will transform risk analysis. Analytics can facilitate technological innovation and progress by complementing existing tools with new
data to better understand how models to mitigate risk can be built.
The hope is that “seeing around the corner” to identify new liability risks will enable commercial companies to be safer, healthier and more sustainable in future.
 Sigma No. 02/2012, 2011 prices, Swiss Re
Rethinking catastrophe risk management
The catastrophe risk management industry is challenged to come up with new ways to understand perils in the global supply chain, shipping network and digitalized global economy.
The Tohoku earthquake and tsunami that struck Japan in 2011 caused an immediate shortage of iPads in Australia, disrupted BMW production in Germany and caused a booming manufacturing industry to be created in Guangzhou, China. Why?
AGCS Client Risk Profile: What is it?
- New innovation to support underwriting and provide technical mitigation solutions
- Primary goal of informing clients of their exposed risk locations and whether the coverage they have matches their risk appetite.
- Useful data includes
> Exposure accumulations
> Identification of key facilities
> Main threatening hazards
> Historical activity
> Probabilistic Catastrophe Risk model outputs
> Potential scenarios of concern with probabilistic loss metrics
AGCS offers Client Risk Profile on its myAGCS.com platform, which provides insureds and brokers with secure online access to key insurance data.
In our age of globalization, when an event occurs in one part of the world a ripple effect along the global supply chain is created that impacts production elsewhere. But how does this ripple effect work? Can it be predicted and modeled?
The catastrophe risk management industry is challenged to come up with new ways to understand perils in the global supply chain, shipping network and digitalized global economy. Not only natural catastrophe disruptions like Tohoku have to be considered, but also new ones like cyber risks, which could severely and instantly wipe out a supply chain.
“In order to support our clients, the catastrophe risk management industry must continue to be client focused and embrace new technologies, digitalization
and IT,” says Richard Quill, Senior Catastrophe Risk Analyst, AGCS.
AGCS is pioneering a new innovation to support underwriting and provide technical excellence. Called Client Risk Profile, the analyses allow clients to see their exposure accumulations and other potential hazards around all their global facilities at once and to identify where the exposures intersect.
“Clearly, the ongoing trend within the industry is to continue to embrace digital technology, in order to move towards more informed decision making in capacity monitoring and risk pricing, taking advantage of the most modern data analytics and technologies” says Ali Shahkarami, Head of Catastrophe Risk Research, AGCS.
“Tackling changing and new types of risks are the challenges we have to deal with - through fostering innovations and new technologies,” says Tina Baacke, Global Head of Catastrophe Risk Management, AGCS.
Changing climate, changing risk
With weather volatility forecast to continue to increase, strategic weather risk management solutions will have an important role to play in future.
The landmark agreement to cut carbon emissions and battle climate change agreed by world leaders last year could transform the insurance and reinsurance industries and will also impact the weather risk management industry, as it
tries to balance today’s weather events with tomorrow’s probable changing climate.
Karsten Berlage, Global Head of Weather Risk Management, Allianz Risk Transfer (ART), oversees a product portfolio of weather risk solutions that protect against the incremental change of daily weather perils like temperature, rainfall and wind as they negatively affect the financial situation of a client. But apart from daily weather changes, is it possible to say that we are in a period of long-term climate change?
“Looking at weather data history, some trends are recognizable, for example higher temperatures in Europe and North America. We also see new records being set for cumulative rainfall, drought, heat and below freezing temperatures – the latter via Polar Vortex events. That increasing volatility may continue to occur and may be part of ‘climate change’”, Berlage says.
The increasing volatility leads to a greater probability of more losses and claims. Weather risk solutions will be more expensive to purchase as more of these types of events occur.
Clean power generation With a focus on the alternative energy sector, ART has
successfully introduced solutions for wind farms, solar parks and hydro power plants to ensure cash flow stability by mitigating wind volatility and price risks. Berlage says that “ART expects these solutions to contribute to more development of clean power generation”.
“Allianz offers solutions for all weather perils globally,” explains Berlage. “However, many potential insureds are either not aware of the possibility to obtain protection, cannot get excess to it or are not willing to pay for the cover.”
Unfortunately, in many cases, only after suffering an actual weather-related loss do many clients realize their need to mitigate weather risks.