White Paper Exposures, Data, and Standards

Transcription

1 White Paper Exposures, Data, and Standards Updated as of Thursday, May 30, CORD Corporation. ll Rights Reserved.

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3 OVERVIEW... 1 THE CHLLENGE... 1 Why does this problem exist?... 2 THE STKEHOLDERS... 2 THE SOLUTION... 3 The Benefits of Standards Implementation... 4 SUPPORTED BUSINESS CSES... 5 DDITIONL RESOURCES... 6 Documentation... 6 F... 7

4 Overview Each year, the insurance industry suffers from huge catastrophe losses that challenge the insurance industry s risk and product management. Companies invest substantial amounts into catastrophe modeling which provides a reasonable assessment of the expected losses, but only if the input data is of a good quality. To date, the industry has not yet succeeded in defining a common industry data standard to manage data efficiently. Resolving this issue is critical to the industry if it is to improve data modeling capabilities and better manage risk. It is a situation where the development and implementation of data standards can be of vital importance. The Challenge The insurance value chain is long and sometimes convoluted. Risk is taken and passed from carrier to carrier sometimes via intermediaries, sometimes directly. Throughout the insurance process, risk is expressed as data. t each hand-off, there is often degradation to the quality of that data due to manual intervention, different data definitions, and other inconsistencies. This is true for data moving between companies and even between departments within a single company. The Insurance Value Chain Without high quality risk data: The insured is more likely to be exposed to average assumptions which can result in inappropriate coverage and higher premiums. Carriers are exposed to greater uncertainty and misunderstandings, which can hinder response time to catastrophic events affecting insureds and the insurance industry. If response time is hindered, it impacts customer service at the time the customers need insurance the most. Carriers cannot accurately assess risk, exposure, and reinsurance requirements. White Paper: Exposures, Data, and Standards Page 1

5 Broker and carrier catastrophe model results are less reliable. Resources and costs are not effectively deployed. nalysts expend disproportionate amounts of time and effort on data cleansing and interpretation of data rather than data analysis. Inaccurate data interpretation can lead to inaccurate modeling results. It can also have implications for carriers regulatory reporting, solvency/capital requirements, e.g. under Solvency II. Why does this problem exist? lthough various file formats and standards exist for the capturing of placement and coverage information, to date there has been no accepted industry standard for collecting and sharing exposure data right across the international insurance value chain. This has left the industry to manage multiple file formats of varying quality and with inconsistent data definitions. Today, companies are sharing exposure data as unstructured information on paper, in PDFs, in word processing and spreadsheet files, and in the reinsurance market via proprietary vendor databases. Without the implementation of a consistent, unified means of moving data through an organization and beyond, the problem persists and cannot improve. The Stakeholders These problems plague companies right across the insurance value chain. Even within companies, they are problematic for many stakeholders, including: Who Management and Board Risk Management Catastrophe Modelers, Underwriters and ctuaries Information Technology Placing Brokers Insureds How Risk appetite, tolerance setting and capital management is impaired. Capital relief requirement is difficult to adequately ascertain. Portfolio risk is less accurately quantified. Disproportionate amounts of time are spent on data cleansing and quality checks rather than data analysis. Inaccurate interpretation of data can produce less accurate modeling results. Developing and maintaining multiple tool/data interfaces is costly and adds little value. dvising clients about risk mitigation and answering underwriters questions on exposure is more difficult; risk presentation made difficult without reliable exposure information. Risk uncertainty can add additional cost to the premium, and may introduce additional conditions affecting coverage. White Paper: Exposures, Data, and Standards Page 2

6 The Solution n CORD Working Group has spent the last few years assessing the insurance market's exposure requirements. cross-section of insurers, reinsurers, brokers and catastrophe modeling vendors have worked together to prioritize not only the data needed to capture and share exposure data, but also develop insurance-specific codesets for e.g. building occupancy, building construction and perils with a very firm focus on determining that the data demands are practical and implementable. The CORD Exposure Reporting Standard can be used to supply a fine level of data granularity at a per-address-, or aggregated level. While there are required elements in the standard, these have been kept to a pragmatic set to ease implementation. In order to bring the benefits of implementation to as wide an audience as possible, the standard is published as a series of standard spreadsheet formats and as an XML message. The spreadsheets provide a standard, structured reporting format in order to report simple address information (i.e. exposure details on a property-by-property basis), aggregated reporting (i.e. aggregated exposure details on a zone-by-zone basis), and delegated authority reporting (i.e. periodic reporting for delegated underwriters to report underwritten properties back to the covering insurer). ll of these reports are also available in XML format as well as a comprehensive exposure report, which provides a fully extensible and configurable reporting mechanism for the various complex structures that reinsurers can have to deal with. ll of the standards are mapped to CORD P&C data items. White Paper: Exposures, Data, and Standards Page 3

7 The Benefits of Standards Implementation More reliable data Reduced processing overheads/improved processing efficiency Improved analysis 1. Industry standards are available for everyone to use leading to more reliable implementation and usage of the standard data from stakeholder to stakeholder. 2. Greater certainty in data definitions amongst all stakeholders. Clear mapping to in-house data standards. 3. Unlike non-standard (e.g. company-specific) formats, industry standards are developed by the industry and anyone who wants to improve them can make use of the available standards-body governance procedures. This means the standards can more easily evolve to remain relevant to their intended purposes. 1. Greater certainty in received format and definition of data, leading to reduced processing times. 2. Greatly reduced duplication or requirement of work steps e.g. addresses encoding, especially in subscription markets, where coinsurers independently repeat the same work. 3. Fewer iterations in risk analysis 4. Standard exposure data, devoid of database formats, is more streamlined and lighter this makes data import/export and running what-if scenarios far quicker. 5. Less reliance on costly data cleansing services reduces costs to stakeholders 6. Less interpretation of data will be necessary 7. Reduced dependency on vendor modelers predefined default values and increased reliance on actual values 1. Improved data quality leads to improved analytical capability 2. Less time spent on data cleansing and data means data analysts have more time to analyse the data at hand 3. Standard data simplifies multi-model approach substantially if the model supports the standard. 4. Standard exposure data can be moved and used by various stakeholders for different analyses, beyond catastrophe exposure analysis; this would include regulatory aspects White Paper: Exposures, Data, and Standards Page 4

8 Supported Business Cases Use Case / Business Scenario Delegated uthority Report (xls/xml) aka ER3001 Simple Report (xls /xml) aka ER3002 ggregate Report (xls/xml) aka ER3003 Comprehensive Report (xml) Stakeholders Large commercial placements. Supporting information for single location properties. Y Y Y Client; Broker; Insurers; Data Modellers Policy conditions and layering currently delivered outside standard form. Worldwide Property Binders - single location Y Y Y Client; gent; (Re)Insurers - policies. (Underwriters & Modellers). Standard import/export protocol for Y Y Y Y Brokers; (Re)Insurers (Underwriters & industry toolsets including aggregation and Modellers); surveyors; engineers catastrophe models and fire rating tools. Standardisation of schedules of insured Y Y Y Y Client; Broker, (Re)Insurersvalues. (Underwriters & Modellers & Claims). Risk visualization, mapping and Geocoding. Y Y Y Y Client; Broker(s); (Re)Insurers- (Underwriters & Modellers) Data cleansing and validation services, e.g. Y Y Y Client; Broker(s); (Re)Insurers- CREST (Underwriters & Modellers) Data quality indexing/scoring. Y Y Y Client; Broker(s); (Re)Insurers- (Underwriters & Modellers) Exchange exposure data of large Y Y Y Client; Broker(s); (Re)Insurers- (residential) portfolios with similar (Underwriters & Modellers) insurance conditions per policy. Typically used in markets with moderate hazard. See use case Reporting and downloading insured values Y Y Data provider and subscribers of and losses to PERILS G PERILS services ny kind of exposure data management, Y Y Y Y ny accumulation control Data provision where data provider must Y Y Y ny not (due to antitrust or data privacy regulation) or is unwilling to supply detailed data White Paper: Exposures, Data, and Standards Page 5

9 dditional Resources Documentation The Exposure Reporting Standards This downloadable file includes both the spreadsheet templates, with embedded implementation guidance and codesets associated with the standards. Its goal is to explain clearly how to implement the reporting of exposures by location for commercial property risks using CORD Standard spreadsheets. The file is available to CORD Members and Non-Members. To download the Standard 1. Navigate to 2. Hover your mouse over the Standards link from the top navigation pane 3. Click on the Data Standards link from the pane that emerges 4. Scroll down to either GRLC Specifications and Documentation or GRLC Members Only 5. Click on the Exposure Reporting Standards link White Paper: Exposures, Data, and Standards Page 6

10 F Do I have to be a member of CORD to use the standard? While we encourage all insurance industry companies to become members of CORD in order to help to pay for the cost, maintenance, and advocacy of industry standards, anyone can access and implement CORD standards members and non-members alike. There are many important benefits to membership such as the ability to: - influence the design and content of CORD standards by voting at plenary - sit on CORD governance committees - attend certain CORD forums for free - obtain discounts for the CORD LOM Insurance Systems Forum - qualify for CORD wards but you do not need to be a member to use CORD standards. Why should I implement the CORD Exposure Reporting Standard? There are potentially numerous important business benefits to implementing the standard, including more reliable data, reduced processing overheads/improved processing efficiency, and improved data analysis. I want to use standard data, but my company is not able to implement XML yet. What should I do? CORD has released exposure reporting standards in XML as well as spreadsheet formats. There are standard spreadsheet formats for simple address level reporting, aggregate reporting and property schedule reporting for delegated authorities. If your business requirements are met by one or more of these spreadsheet standards, you should consider using these with your business partners while until you are able to implement the XML. This is an IT project if I use XML format. Why should I be interested? IT is an enabler, but implementing industry standard Exposure Reporting capability is intended to provide significant business benefits to various stakeholders within your organization, and right across the insurance value chain. Your IT department will require business sponsorship in order to implement the standard, but the benefits will fall to the business. How much do I have to pay to use the standard? In short nothing. There is no fee to obtain or make use of the standard e.g. templates can be downloaded for free (subject to agreeing to a no-charge license agreement). ny implementation costs are yours alone, and will depend on what new tolling you require (e.g. a messaging gateway if your company does not already have one) or whether your solution provider will require a contribution from you. White Paper: Exposures, Data, and Standards Page 7

11 Which Catastrophe Modeling solution providers have committed to implementing the standard? To date, the three market leading providers IR Worldwide, EECT and RMS have all committed to implementing an CORD import and export feature in future releases of their products. Do I need to change my systems to use the standard? No. Standards exist to successfully bridge data between systems. There is no inherent need for anyone to have to change their systems in order to make use of standards. Unless your systems were developed using CORD data definitions, you will need to map your data to CORD s data items; that is generally a once-and-done task. However, you system vendor may provide that mapping for you, saving you the task. You may also need to integrate a messaging gateway to your systems, to allow system-to-system XML data transfer. White Paper: Exposures, Data, and Standards Page 8