Swiss Re calls for new and improved data to modernise pricing methods, risk assessment and unlock growth

Data is the new oil—or so we keep hearing. In the modern digital economy, where everything is subject to immediate and persistent analysis and quantification, having access to the right information at the right time can make all the difference between success and failure.

In many ways, the re/insurance industry has been ahead of this curve throughout its history, relying as it does on crunching the numbers to find accurate prices and, by extension, the probability of unwieldy events ranging from hurricanes to cyber-attacks.

But the past two years have offered a stark reminder that risk is never a constant. In an ever-changing world, is the industry prepared to tackle the risks of the future?

Daniel Knüsli, head of P&C analytics at Swiss Re, spoke to Intelligent Insurer to discuss how the industry can improve its use of data.

The reinsurance market has suffered a swathe of losses over the last 18 months—from the pandemic to severe flooding in Europe—and these events have underscored how the nature of risk is changing rapidly.

With emerging risks such as climate change and cyber attacks moving up the agenda, and growing awareness around “secondary perils” such as wildfires, the market needs improved data and information to more accurately price for this shifting environment.

“Given that we are in a very fast-changing exposure and risk landscape, this calls out for new data, new modelling and new pricing approaches.

“As with many of these risks, we don’t have the data to offer proper pricing with the risk assessment. If you are considering some of the methodologies around pricing, which are predominantly backward-looking, you will hit a certain limitation when it comes to pricing models,” said Knüsli.

He added that the losses the market has suffered, in tandem with changing market dynamics, demonstrated that risk selection had to be improved over the long term.

“As an industry, we’ve probably been subject to a considerable margin around the market cycles that we’ve been exposed to. That requires better risk selection, and the ability to better manage the volatility that comes from these risks—as well as the impact it has on the portfolio,” he said.

“We need to have a better target in terms of focusing on the right opportunities, and we need to become stronger when it comes to steering the portfolio. In these areas, analytics and data will play a pivotal role in achieving that goal.”

Moving with the times

Improving risk management and pricing for companies is an important short-term goal, but Knüsli highlighted the broader cultural importance of signalling to potential employees and partners that the re/insurance market is moving with the times.

He said that ensuring the industry was comfortable with using data and analytics would be a key component in attracting talented younger professionals into careers in the market.

“That is very important. As an industry, we must make sure that we are perceived as an appealing employer—particularly for younger people. It’s about being able to attract young talent and being considered as a potential employer going forward,” he added.

Swiss Re is wasting no time in speeding up its efforts with regard to providing more tools, data and models for clients and partners in the industry to support growth, improve profitability and enhance efficiency. To that end, the team has launched Impact+, a suite of applications which Swiss Re has been building for the past year.

“We were excited about the launch of Impact+, which we believe is the first B2B app store for the insurance industry.

“Impact+ allows our clients to have easy access to Swiss Re’s best-in-class applications, 200+ insurance relevant datasets and models at any point in time. New developments and features will be launched regularly to ensure we address the most pressing needs of our clients and thus keep evolving,” Knüsli concluded.

Daniel Knüsli is head of P&C analytics at Swiss Re.