In a world of advanced models, the underwriter still reigns supreme
Marek Shafer, Chief Digital Officer
(This article originally appeared in The Canopius Herald in March 2018)
At Canopius we invest heavily in advancing our understanding of the natural world. Our catastrophe models are tuned by incorporating alternative science and our own claims experience. Our technical pricing models allow us to allocate syndicate capital down to each deal, and our optimisation tools guide us toward capital efficient portfolios. We take pride in our understanding of cat risk – it differentiates us.
Likewise, our underwriters are a precious asset, bringing knowledge and experience to the table, and their personalities in aggregate represent the Canopian DNA.
So far, so Lloyd’s.
Now, what sets Canopius apart is the way we strive to ensure these two – often at odds – functions work together to look beyond the models for the true nature of risk. As a result, we share a common outlook: we both baulk at a market willing to turn on a dime due to an ill-considered model release; we both view cat model-induced herd behaviour with deep suspicion.
Of course, we recognise the essential role that robust cat modelling plays in capital management, and the importance of the rigorous treatment of data. But the indisputable fact is that models are only as good as the science and loss experience that they are built on: we need only look back to 2017 for confirmation. We strongly believe that our assessment of individual deals should not be delegated to a bunch of scientists in Boston, or Newark: the decision should sit firmly in the domain of our underwriters and analysts, who take time to grasp the nuance of every risk and the needs of our clients, and act accordingly.
Posted on 29th March 2018.