Log In

Reset Password
BERMUDA | RSS PODCAST

Grandisson: Re/insurers too reliant on models

Re/insurance companies may be over-reliant on computer models which tend to be very similar to each other across the industry.

That is the view of Marc Grandisson, CEO of Arch Worldwide Reinsurance Group, who was speaking at the PwC/S&P Bermuda (Re)insurance 2011 conference last week.

“The beauty of underwriting is that no-one really knows what’s going to happen,” Mr Grandission, himself an actuary, told delegates. “You have to pick and choose where you’re going. It’s very much a judgment call. Those who win can win pretty big.

“We have so many actuaries going to the fifth decimal place, when sometimes we miss what is happening on the left hand side of the decimal point.”

The use of standardised models across the industry was effectively correlating risks within the industry, Mr Grandisson said.

“Models are relied upon much more than they were 10 or 15 years ago,” he said. “Everybody is using the same model and so when something unexpected happens, then everyone makes big losses.”

Models were useful for benchmarking and for selecting risks, he added, but not at giving an absolute view, Mr Grandisson added.

You must be Registered or to post comment or to vote.

Published November 14, 2011 at 1:00 am (Updated November 14, 2011 at 8:37 am)

Grandisson: Re/insurers too reliant on models

What you
Need to
Know
1. For a smooth experience with our commenting system we recommend that you use Internet Explorer 10 or higher, Firefox or Chrome Browsers. Additionally please clear both your browser's cache and cookies - How do I clear my cache and cookies?
2. Please respect the use of this community forum and its users.
3. Any poster that insults, threatens or verbally abuses another member, uses defamatory language, or deliberately disrupts discussions will be banned.
4. Users who violate the Terms of Service or any commenting rules will be banned.
5. Please stay on topic. "Trolling" to incite emotional responses and disrupt conversations will be deleted.
6. To understand further what is and isn't allowed and the actions we may take, please read our Terms of Service
7. To report breaches of the Terms of Service use the flag icon