Proper controls needed to manage accumulation risk

“Accumulation risk is not easy to manage effectively if the proper controls are not in place,” said Guenter Kryszon, executive underwriting officer global property at  Markel.

His comments came as he discussed the difficulty of monitoring and measuring natural catastrophe and man made cats such as strike, riot and civil unrest (SRCC) and cyber.

“How we measure this is an interesting question, as is monitoring where we have accumulation risk,” he said as spoke in his keynote session, at the Underwriting Innovation USA 2023 conference in Chicago (13-14 November).

Highlighting examples of man-made cat, which he called “the unbinding of the social fabric”, he said they were not necessarily limited to individual geographies.

“For example, Israel and the conflict in Gaza creates the question: ‘Is it war or is it terrorism?’ The conflict has created rioting in London and New York. So in terms of accumulation risk, what is the impact of SRCC?” he commented.

Kryszon also shared the insurer’s experiences of covering ships transporting grain from Ukraine through the Black Sea grain corridor and explained how they had managed the accumulation risk of ships travelling in a conflict area.

Markel is able to offer insurance cover to the ships and set individual risk aggregates because every ship transporting grain has a beacon signal that can be captured, he said.

Using this location data, the insurer can assess where all the ships are at a particular point in time and from that data calculate individual risk aggregates that include all the ports in Ukraine.

“From this, we're able to effectively manage individual [insurance] responses within the Black Sea, so we can effectively manage that exposure. That made us comfortable to deploy the capacity into the Black Sea.”

Kryszon’s keynote session, titled ‘How underwriters can plan for and mitigate accumulation risk caused by catastrophic events’, also looked at how to identify new technologies that can help insurers tackle and reduce accumulation risk, as well as using such technologies to improve the management of high severity loss incidents.

He also spoke about how insurers can better assess the impact of climate change alongside the developments in big data and predictive analytics, and how insurers can quickly adopt and implement modelling improvements to support better portfolio management.

Did you get value from this story? Sign up to our free daily newsletters and get stories like this sent straight to your inbox.