Accurate boundary data is key for assessing risk

Outdated or inaccurate boundary data is itself a risk to re/insurers. On the other hand, precise and up-to-date boundary data can help develop new markets quickly, Matthias Hauschild, senior consultant for financial services at GfK, tells Monte Carlo Today.

In emerging markets, the key to unlocking the insurance growth potential and detecting potential accumulation risks in advance lies in using accurate and consistent geographic base data such as postcode boundary data. That is the message from Matthias Hauschild, senior consultant for financial services at GfK, the market research company that develops CRESTA zone maps together with the CRESTA organisation.

Ever more companies are aware of the advantages of CRESTA boundary data, which is allowing them to make inroads into developing the insurance potential of emerging markets.

One example is JBA Risk Management, whose consultancy services specialise in flood risk cat models and maps. The company, which is part of the JBA Group, one of the biggest consultancies in the sector, is spearheading a number of initiatives in Asian markets.

“As well as using boundary data in all our models as an import option, we've shown how CRESTA zones, alongside our own innovative flood data, can demonstrate new methods of aggregated risk assessment.

“Uncertainty is a constant theme in the reinsurance industry, especially in disaster-prone regions where detailed exposure data is lacking,” said Dr Iain Willis, managing director at JBA Risk Singapore.

“Accurate boundary data is invaluable in any risk modelling, but especially when working in emerging markets.”

Several other major risk modellers and reinsurance brokers are also using GfK boundary data in their respective systems. In short: ultra-precise boundary data is an important global industry “currency” used in risk modelling and reporting alike.

Consistent quality and very high geographic accuracy are becoming ever more important. CRESTA zones, which were developed by the CRESTA organisation to create a unified basis for referencing location-related risk data, are the industry standard today. GfK is the official provider of these maps, thanks to its decades of experience in generating digital boundary data and its detailed global coverage of such information.

“The fact that major risk modellers, brokers and reinsurers are already using our boundary data and also use it as a common basis for reporting means that the industry as a whole can progress faster on getting a handle on certain risks and developing new products in emerging markets in particular,” Hauschild says.

Great potential

“Tackling the challenges of exposures in emerging markets isdifficult to do without preliminary loss estimates, as there is a lack of data,” continues Hauschild.

“CRESTA zones help generate accurate loss estimates. They are the basis for precisely assessing, pricing and underwriting new risks.”

He elaborates that CRESTA zones have two major advantages: the first is the accuracy they offer, which reduces risk for insurers and reinsurers.

“By using inadequate geodata, re/insurers and brokers run the risk of costly discrepancies between the local risks they think they are pricing versus the amount of claims that actually accumulates,” Hauschild says.

The second is the fact that the data offer a very accurate and practical way of comparing and exchanging risk and exposure-related data.

“The CRESTA zones offer a globally verified standard. This puts everyone on the same playing field.”

Hauschild concludes: “Everything from underwriting to cat modelling to reinsurance to capital management and claims management all depend on good quality, accurate exposure data. Using CRESTA data to validate and improve your exposure data produces more precise results across the full spectrum of insurance operations.”

Matthias Hauschild is senior consultant for financial services at GfK. He can be contacted at:  matthias.hauschild@gfk.com