Unravelling uncertainty in the changing risk landscape

Russell Group’s Suki Basi on why understanding the rapidly changing risk landscape requires a new kind of thinking.

As I outlined in my first article for The Insurer at this year’s Monte Carlo Rendez-Vous, Russell Group has been engaged in a number of connected risk projects with Lloyd’s managing agents to quantify intangible risks within plausible threat scenarios such as Russia-Ukraine, China-Taiwan, digitalisation and casualty clash.

This is a landmark moment for Russell. It connects long-standing clients with the journey to unravel uncertainty and deliver opportunity, through collaboration and forward-looking analysis – something we enabled 30 years previously with our work on Lloyd’s Equitas and subsequently with the aviation reinsurance market questionnaire.

Client solutions

The project connects multiple in-phase initiatives at Russell that incorporate much of our thinking over the past few years. It is part of our transformation journey to collate and process data, and then use it to drive and develop solutions which align with our strategy to build client value for the existing (re)insurer and new corporate client base. For example, the Russell team works with 15 data supplier partners to ensure that the latest data is available, cleansed and name-matched to provide the insights that clients require to visualise their exposures across the aviation, marine, energy and casualty classes.

It is through this investment in and connection of multiple data sets that we aim to provide our clients with holistic connected risk insights and continued value, in a manner already demonstrated to the world’s media during the events of recent years. A clear example of this was our analysis of the impact of disruption to the flow of trade ($3.4trn) in the Malacca Strait caused by a potential geopolitical event involving China, Taiwan and the US. This is why an enterprise-wide view of outcomes is required by exposure managers and (re)insurers to model the exposure and manage their risk transfer requirements. Forward-looking connected risk insights enable future analysis and the ability for companies to handle risk proactively across their portfolio and build resilience.

Connected impact analysis

Understanding this rapidly changing landscape requires a new kind of thinking and the development of new skills. Russell has quickened our machine learning and artificial intelligence journey. We now have the capability to provide a connected impact analysis, helping clients and their teams to understand consequences of disruption caused by grounded airline fleets, war, clash, claims inflation and business interruption, for example. What are the threat scenarios? Once understood, we can generate scenarios for global threats to apply to client portfolios. Is it insured or not? We want to determine covered and uncovered exposure. What is the gross/net calculation? This knowledge will help to calculate covered scenario exposure gross and net of (re)insurance for client portfolios. Lastly, is our model forward-looking? If so, we can then identify current and future exposure concentrations within a portfolio for an event, location, industry sector or supply chain.

Suki Basi is managing director of Russell Group