Baden Baden:
New technologies and the ability to process large amounts of data are revolutionising the value chains across entire industries – including in insurance, said Doris Höpke, member of the Board of Management of Munich Re.
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Nowadays, Munich Re experts combine primary insurers’ portfolio data with external, public sources, for example about site geography, building construction, weather or socio-economic status as data analytics and artificial intelligence open up new possibilities for managing and covering risk.
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“By applying machine-learning principles, Munich Re can discover hidden loss drivers and respond accordingly, for example by introducing loss-prevention measures or adjusting pricing,’’ said Hopke at a at a press conference at the Baden-Baden reinsurance meeting,
Munich Re’s experts again combined the primary insurer’s portfolio data with external sources to analyse the situation. With the help of machine learning, they can thus identify the risk drivers for individual buildings, and predict the losses for the coming year accordingly. This enables primary insurers to improve their portfolio management and thus their loss ratios,’said Hopke.
Taking the example of motor insurance: “The Box” supports cedants in managing their portfolios, by using machine learning to precisely predict expected damage. If one then adds external data such as weather conditions, accident statistics or socio-economic information to the mix, the loss estimates become even more accurate and loss ratios can be measurably lowered. The tool is completely automatic, allowing primary insurers to price more efficiently and significantly reduce costs.
Another Munich Re data analytics initiative is called “AQUALYTIX” and applies to water-mains damage. For over ten years now, more than half of all losses in traditional residential-building insurance have come from water-mains damage – a problem for which no satisfactory solution has yet been found.
“At Munich Re, our goal is to pioneer digital solutions for the insurance industry. So we have been investing heavily in data analytics and artificial intelligence, in order to support our clients with innovative methods and new products. This means faster claims estimates and handling, and better pricing as a result of improved accuracy in risk assessment. Not to mention better loss prevention in the first place,” said Hopke.
Hopke further said climate change is causing the risk of extensive wildfires to increase rapidly, not only in North America but also mainland Europe and said the increasingly large losses from wildfires globally were due in part to higher insured values in exposed areas.
“The risk of extensive wildfires is rapidly increasing. We have seen extensive wildfire activities in Siberia [and] in Scandinavia, [which is] not so relevant in insured values but definitely a phenomenon we have not seen in the past.”
Climate change was also one of the most significant factors, she said.
Höpke also said that the financial impacts of cyber losses were becoming more severe and said demand for cyber prevention and protection would increase, as greater interconnectivity increased risk exposures.
She said that while cyber cover was growing in all regions in double-digit percentages, the rest of the world was catching up with the largest market, the US.
At present, roughly 80 percent of global cyber cover was for US risks, Höpke said, but she added that she expected this to shrink to around 50 percent within roughly two years.
Höpke said Munich Re had around a 9 percent share in the cyber market and that the carrier wanted to maintain this.