We are having a fabulous Fall here in Boston, and that means chilly mornings, shorter days, spectacular foliage, apple cider, and pumpkin pies. It also means insurers are busy planning next year's anticipated growth.
Where will a company grow? How much exposure will be accumulated? Typically, these numbers are drawn up by talking with key agents and regional underwriters to estimate potential business. CATRADER®, the industry standard for analyzing reinsurance contracts and insurance-linked securities, can help with this process as well.
CATRADER can be used to assess potential exposure's impact on an exceedance probability (EP) curve. This is particularly effective if growth is in a geographical region where a company does not have much experience. Take-up rates are taken into consideration in CATRADER, which helps identify growth opportunities in markets that would actually acquire insurance.
Naturally, underwriting guidelines will reduce the potential market shown by CATRADER. A catastrophe manager should be able to temper results due to underwriting differences accordingly, but the advantage of being able to determine potential accumulation concerns before next year's goals are set should be readily apparent.
The last thing that an agent wants to do after being given a directive to grow business by X% is inform customers that capacity is no longer available due to capacity concerns. Even worse would be having to non-renew or cancel policies due to capacity constraints after receiving a growth directive.
Fortunately, CATRADER gives insurers the ability to approximate capacity during their planning process, which allows for achievable results within an organization's risk appetite. By taking an existing portfolio and adding potential new exposure from CATRADER, stresses on the EP curve can be highlighted during the planning process and appropriate changes to anticipated reinsurance spending or modifications to growth goals can be applied before pushing a growth directive out into the field.
As the noted author on personal time management Alan Lakein said, "Planning is bringing the future into the present so that you can do something about it now." Used creatively, CATRADER can be an insightful tool to use in your planning process.
