How knowledge drives underwriting outperformance (I)

Investment in research and development (R&D) is the basis for continued underwriting outperformance in casualty, where forward-looking modelling can give us a competitive advantage — especially in a changing market.

Swiss Re is driving an industry-wide shift away from backward-looking to forward-looking modelling (FLM) for casualty. FLM is about anticipating future business outcomes for the re/insurance industry in the light of changing economic, societal, and legal dynamics, without having to wait for claims to emerge.

Modelling liability catastrophes and risk accumulation is especially challenging as there is limited historical loss information available, and new risks keep emerging. Moreover, growing digitisation and globalisation of society and industry is making our risk landscape more complex and interconnected, increasing the accumulation risk potential in our liability books.

Swiss Re’s proprietary and patented FLM approach for liability lines is Liability Risk Drivers™ (LRD). LRD starts with loss scenarios (instead of statistics of past claims). LRD runs the scenarios through the environment or jurisdiction in which the risk originates and looks at risk drivers, such as the economic or legal environment. This allows us to analyse the scenario against expected trends in risk drivers.

Our proprietary approach enables our clients to grow and write business where there is little relevant experience. Our global presence and perspective also offers clients a more accurate view on risks globally, enabling better risk selection.