EXCLUSIVE: “At The Eye of the Storm” – Rosina Smith, McKenzie Intelligence Services in ‘The Insurtech Magazine’
Rosina Smith, Head of Product at McKenzie Intelligence Services , reveals how its Global Events Observer is changing the way risk is perceived and managed, as catastrophic events become more common – and costly
From live feeds of global weather events to on-the-ground monitoring of political conflicts, every square inch of the planet can be observed, even as events unfold – a gift of intelligence that insurers cannot live without.
“Anyone in exposure management will tell you that you’ll get a phone call while it’s still raining, asking ‘how much is this going to cost us ?’,” says Rosina Smith, head of product at McKenzie Intelligence Services (MIS), a leading provider of intelligence data to re/insurers. And, thanks to the MIS Global Events Observer (GEO), co-funded by the European Space Agency and launched last year, it can now provide an accurate response to that question. MIS pioneered the use of high-frequency imaging data to solve complex business problems a decade ago.
By 2015, it had delivered the first web-enabled before/after comparison of satellite imagery for the insurance industry within hours of a loss event. Two years later, it won the contract to build the Lloyd’s market catastrophe intelligence platform, serving all 55 of the Lloyd’s market’s managing agencies.
But the GEO is a step-change for the company. It allows MIS to collect and analyse highly accurate, geotagged external data from a larger range of space and ground sources, compare it to data held in the GEO vault, which for some perils goes back to 1979, and then apply various intelligence techniques to interpret the information, based on MIS analysts’ detailed understanding of how exposure management works – and all in close-to real time.
“We built our intelligence collection plan based on our insurers’ exposure,” says Smith. “We know the properties our insurers care about and we can analyse those properties, collecting information on what is happening in our insurers’ portfolio.”
The GEO platform involves a two-step process. First, the intelligence team will open up all avenues to wholly understand a given event. This may start with checking the validity of open-source datto deploy observational resources via drones or flights. The second part, the conclusions of which are made available in GEO, is collating the relevant information about an event that insurers need to know about, in the context of their exposure.
This is configured in Global Events Observer’s Insights feature, which allows insurers to assess their entire portfolios against the event – even before it has fully played out.
“We will be delivering to our insurers within 24 hours of the event occurring, and each line of their portfolio will be enriched with MIS Damage Assessment,” says Smith. “So, we will be telling them that ‘this location that you insure has suffered severe damage’, quickly enabling them to understand when claims are likely to come in, pre-first notice of loss (FNOL).”
MIS’ most recent case study analysed the development of Louisiana’s Hurricane Ida in late 2021, the second deadliest storm after Katrina, with heavy winds, flash floods and severe power outage. Within 24 hours, MIS published a report for exposure managers, collecting open-source and licensed data on wind speed and local emergency reports, building a fully verified picture of the catastrophe. A report for claims managers was available within 48 hours, allowing operational decisions as well as technical claims handling.
“Of course, there are other events which aren’t modelled. Take the conflict in Ukraine or the Texas Freeze event,” says Smith. “Previously, insurers have been left to work out how to exercise their approach on an event-by-event basis, whereas we can at least give them that starting point so that they can begin before their client list has told them they’ve suffered a loss.”
MIS and its team are in a constant state of learning and adaptation. With every event, sources are robustly tested and refined, meaning insurers can rely on MIS to work with suppliers and data types that are effective and valuable in accurately determining damage. Natural perils are constantly observed, using live feeds that are stationed around the world. But for political and singular events, the team can call on specific datasets.
“That is where the intelligence discipline comes in,” says Smith. “We have a collection plan that is bespoke for each and every event, we work with numerous suppliers over a range of data types and territories to deliver the best geospatial representation of activity on the ground. Our approach varies by event, by territory, but our outputs are consistent. Our aim is to give our clients output they can rely on and be certain of, despite it being made up of varying inputs – we’re effectively managing noise, so our clients don’t need to. Because we’re data-provider agnostic, we will use the best tool for the job.
“If you look at the conflict in Ukraine, sources that we might deploy in other circumstances, like drones, would not be available, nor appropriate. We have to make sure we are using [other] reliable and accessible sources.
“Even when you take something like a hurricane, we can make use of aerial sources but we still need to corroborate the imagery with other datasets we can find on the ground as well.”
MIS is staffed by multi-skilled product and exposure management experts, but many – including its CEO – also have a history in military intelligence.
“Two worlds have collided in MIS creating something special,” says Smith. “We have senior personnel within our business who have had extensive careers in the military and been through NATO imagery training. That influence is met by the insurance expertise that we have invested in for the last two years. Together, they’ve a unique view of the world, which makes up the beauty of our offering: trusted intelligence applied to the specific insurance use case of event response.”
Now is an exciting time for McKenzie Intelligence Services. It is gearing up for international expansion and adding more features to the GEO platform. Global Events Observer’s potential in the growing parametric insurance industry – where pay outs within agreed parameters are triggered by forecast indicators (of, for example, critically low rainfall or high winds) – is obvious as the human and monetary cost of climate-related catastrophic events increases.
“Two worlds have collided in MIS… trusted intelligence applied to the specific use case of event response”
In the US alone, the total cost of billion-dollar disasters between 2017 and 2021 hit $742.1billion, according to the US government, setting a new record. And yet large swathes of the world’s population still have no financial protection against such disasters, making it likely that parametric-based products will continue their current 10 per cent, year-on-year market growth.In October 2021, soon after the launch of fGEO, MIS signed a partnership with Yokahu, the first specialist provider of parametric hurricane insurance in the Caribbean.
A digital-first managing agent and approved cover holder at Lloyd’s, Yokahu provides cover to people and businesses in cyclone-vulnerable areas of the world. The partnership sees MIS become the sole trigger data provider for the product, using automated intelligence from Global Events Observer.
Speaking at the time, MIS founder and CEO Forbes McKenzie said it demonstrated how insurtechs working together could improve the resilience of people at risk of natural disasters. The incorporation of real-time intelligence into its services positions MIS as a facilitator for this type of insurance.
“We fill a very real gap in the event response process. Having filled this gap, MIS clients are making early calls on reserving, on triage of their loss-adjusting resource, and on setting their response,” says Smith. “They are doing this immediately, pre-FNOL, offering a better product and keeping senior stakeholders abreast of what is happening. We can finally give them the tools to put credibility behind those complex events.”
Smith sees a key role for MIS in helping insurers navigate the best use of geospatial and observational technology solutions as they hit the market. Meanwhile, MIS is embarking on capital fundraising as it expands into new territory.
“With Global Events Observer, we have great traction in the London market, but we are expanding in late 2022 into North America,” says Smith.“We will be doing a targeted fundraise to support that expansion and other areas of focus, and to make sure we continue to answer the right questions
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