Guy Carpenter & Company, LLC has formed a specialized project team to identify a more scientific, practical approach to cargo accumulation modeling. The bulletin said the “new team’s efforts have resulted in the creation of the ‘Guy Carpenter International Trade Database (ITD),’ which stores a vast number of historical trade patterns.”
The team was drawn from experts in several different fields, including “experienced analysts from the firm’s Instrat(R) unit as well as brokers from its Marine and Energy Specialty department. The have also announced the publication of “Cargo Accumulation Modeling: The Guy Carpenter Approach,” a report documenting the firm’s approach to achieving a better understanding of these complicated exposures.
“The accumulation of exposure in cargo insurance is an issue of critical importance for the marine insurance and reinsurance industries,” explained Dickie Whitaker, Managing Director of Guy Carpenter’s Instrat(R) unit. “With increasing pressure on insurers to identify their accumulations and potential vulnerabilities more accurately, having a better grasp of potential accumulations within their portfolio of risks can be vital to a company’s success. This means being able to understand, on a policy-by-policy basis, what types of cargo risk are being shipped, where and when quantities of cargo being shipped, and to and from where they are traveling.”
The bulletin noted that the “report divides port accumulation modeling into two distinct elements – the analysis of exposure accumulation and the analysis of cargo vulnerability in the context of natural perils. Each of these elements is analyzed using Guy Carpenter’s exposure analysis methodology, which is designed to identify the magnitude and seasonality of international trade volumes at global port locations, as well as the total value of cargo stored at specified ports at any time of the year and the likely cargo types involved. The methodology is illustrated using practical case study examples.”
Whitaker indicated that the phenomenon of “cargo accumulations” hasn’t been well understood and rarely quantified. Under those circumstances they “presented our team with an ideal opportunity for scientific analysis and modeling,” he added. “What we have provided is a practical methodology for understanding cargo accumulation exposures that can be integrated easily with a host of other tools.”
Guy Carpenter’s new approach to cargo accumulation modeling provides its clients to employ the following capabilities:
— Assess the seasonality of their exposure at ports over time
— More accurately assess Probable Maximum Loss (PML) for various perils, cargo types and port locations.
— Improve capital modeling and Realistic Disaster Scenario (RDS) calculations.
— Provide improved information to reinsurers to achieve more reflective pricing.
— Assess the correct level of cargo catastrophe reinsurance cover more precisely.
— Aggregate exposure accumulation estimates with other lines of business.
The report also examines how this new cargo modeling approach can be enhanced by other Guy Carpenter tools such as i-aXs(TM), its web-enabled data management platform. Integrating Guy Carpenter’s cargo modeling methodology with i-aXs(TM) offers the capability to visualize port exposures, calculate accumulations, assess the impact of covering specific product types and determine aggregate exposure to natural disasters in real time. By leveraging the new cargo accumulation modeling approach in tandem with i-aXs(TM), clients will be able, for the first time, to view and assess marine exposures alongside property exposures.
Source: Guy Carpenter
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