Tackling business interruption risk with new technology

As the frequency and severity of risks is increasing across the globe, the ripple effects of such events will be far-reaching in this highly interdependent world.

That is why managing the risks from business interruption/contingent business interruption (BI/CBI) has become increasingly crucial, according to Shruthi Rao, founder at insurtech startup Adapt Ready.

Rao is one of more than 20 startup founders discussing the insurance market at the annual Intelligent InsurTECH conference on October 3 in London. Click here to find out more.

The New York-based company is one of the very few startups addressing business interruption, the biggest risk for commercial insurers after cyber risk, she claimed.

“While the current state of technology has advanced greatly—in terms of both the volume of data collected and new ways in which to make sense of that data—its application has been mostly in the consumer space: typically marketing and product design/development.”

However, its application to improving business processes or solving problems facing the business world has been somewhat limited.

And, according to Rao, this is despite the need “to not only limit the economic losses from extreme events but also their impacts on vulnerable communities”.

Adapt Ready is tackling this problem through the use of its propriety technology to model risk interconnections.

Traditional risk modelling highlights the impact of an event on a specific property or location, while Adapt Ready’s platform identifies risk interconnections through a combination of heuristics and artificial intelligence.

“Risks around the world are rising, and climate change only adds to the stress on insurers,” explained Rao.

Over the past few weeks, there have been three major hurricanes and two devastating earthquakes, and insurers will continue to face unforeseen claims.

Rao added: “Thus, there is a need to consider multiple data points during not only underwriting (pre-bind) but also for portfolio risk management (post-bind).”

According to the startup founder, underwriters and risk experts lack clarity about risk exposures/accumulations in their portfolios because they have too little data from clients/brokers.

Over the past few years, the industry has faced “intense pressure” from a regulatory standpoint, particularly in the EU with Solvency II.

“Born out of this is the Lloyd’s market’s industry dry runs to determine the impact of market-turning events and whether the industry has access to sufficient resources to cope with extraordinary losses associated with the dry runs,” she said.

And while this is limited to individual property and location risks, Rao believes that her company’s technology can “play a crucial role in exposing the potential knock-on effects of such events”.

Adapt Ready’s platform provides benefits in three key areas: more accurate pricing, proactive risk management, and new markets, concludes Rao.

Adapt Ready is one of more than 20 insurtech startups attending Intelligent Insurer’s Intelligent InsurTECH conference on October 3 in London. Click  here to find out more.