neil prior, managing director
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How is the insurance market adapting to new opportunities and challenges?. Neil Prior, Managing Director. The Origin of Sciemus. - PowerPoint PPT PresentationTRANSCRIPT
Commercial in Confidence
Neil Prior, Managing Director
How is the insurance market adapting to new opportunities and challenges?
Commercial in Confidence
The Origin of SciemusSciemus was founded in 2002 to create a series of advanced risk analysis models across a variety of industries significantly improving the ability to quantify present and future performance and risk of underperformanceSciemus takes an engineering based approach to building models and targets development where, historically, there has been an over reliance on experiential judgment and inadequate analysisEach of our models are driven on the worlds largest normalised data sets using unique modelling capability. The models are independently accredited by leading consultancies and rating agencies
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Sciemus PowerSciemus Power have been underwriting in Power since 2008 with various companiesNeil Prior 27 years in insuranceBroker with Marsh and JLT – Power Sector FocusPower Underwriter at ACE from 2007-2013Managing Director at Sciemus Power
Started to underwrite power business since September 2013 as an MGA on behalf of a select panel of Lloyd’s syndicates
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Underwriting as a New EntrantPower Insurance highlights over the last 5-10 yearsValues doubling over 10 yearsDeductible and sub-limit stagnationRenewable energy increased market share Flexibility has overtaken efficiency in the value chainBusiness interruption profile changes Investment and maintenance revised emphasisAgeing assets
Results have shown a steady increase in attritional losses
Challenging time for Power Underwriters
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Power Industry ChangesGrowing Renewable energy market share
General move from baseload to load balancing power generation
Shift away from long standing operational modes of ageing assets
Increased maintenance spend coupled with increased failure rates
Large increases in insured values ~100% in 10 years
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Impact on Insurance
“The forced outage rate has increased over the last ten years even though maintenance has increased as well”
EURELECTRIC, Power Statistics & Trends 2011
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Deductibles have less impact on claims
Increasing claims frequency
Greater uncertainty around BI numbers and claims
Plant Loss History less indicative of future risk
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Responding to Industry ChangeThere is a need for insurers to move beyond Subjective Judgement
Experience and opinion must be balanced with robust statistical analysis
What tools do you need?DataAnalysis of past performancePredictive modelling
Encouraging data exchange between client and underwriter enables better informed decisions
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Engineering know-howUnderwriting Discipline
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Applying the Understanding of RiskLeveraging from a wider dataset allows the effect of operational changes to be forecast
Breaking down the plant into component parts maximises relevant data for analysis
Modelling takes into account significant risk drivers such as maintenance, spares, operating regime, technology, fuel and age
Policy specifics applied to the plant model, allows for a like-for-like comparison of changing values and deductibles
Underwriter benefits from specific loss distribution to better inform risk selection and pricing
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Data PartnersStrategic Power Systems
The world’s leading collector of Power Station Reliability, Availability and Maintenance (RAM) data through ORAP®
Formerly National Gas Turbine Research Unit
Clients include major manufacturers and global operators
Knowledge repository of over 8,000 Power Plants and over 7000 generation unitsEvent data for more than 13000 years worth of operations
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And Growing…
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It all starts with the Data….Analysis and the data it utilises, needs to be maintained and kept current
Continually respond to changes in risk due to operational and technological shifts
Communicate the value of deductibles and allow operators to gain best valuethrough retention and transfer of risk
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DATA
Operation Characteristics
Experience Based
Analysis
Predictive Modelling
Technical Underwriting
Relevant Retention
Setting
Improved Results &
Stability
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A Concluding View
A new entrant will not survive if all it provides is cheap capacity in an already capital-rich marketplace
Performance Data is the most significant item of information in analysing the exposure in the power sector where >75% of all losses are as a result of machinery breakdown
Understanding and analysing this data and working with clients to set relevant retentions and fair premiums will be the simplest route to achieving market stability
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….or in others words
Wouldn’t it be great for us all if we had
Security of insurance supply?
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