Enterprise Risk Management Technology Guide 2021 :: Moody’s Analytics: Supporting insurers’ integrated risk assessment

Moody’s Analytics: Supporting insurers’ integrated risk assessment

Climate change is a critical issue for the industry in 2021 – how are you helping your customers to address the challenge?

Colin HolmesIf we needed it, we have been given some clear indications of the urgency for action, with the recent UN report underscored by tragic wildfires in Greece and extreme heat in North America, to name just two.

It’s clear the insurance industry has a key role to play to support the transition to net-zero. Insurers now need to incorporate sustainability into their risk assessment and decision-making processes around who they do business with, how they invest, and to effectively assess a changing set of risks.

Some of these requirements are coming in the form of regulation and standards, for example through insurers’ ORSAs, TCFD reporting and the EU Taxonomy for environmentally sustainable activities. So, we are providing solutions to insurers in these areas – including ESG assessments, climate-pathway scenarios and modelling the impact on asset portfolios.

As regards our own operations, Moody’s has implemented a decarbonisation plan, setting out - and making good progress against - targets to reduce greenhouse gas emissions, and we report these in line with the TCFD standard. The world greatly needs leadership and real action on sustainability - I am proud to work for a firm which demonstrates a clear commitment to tackling this critical issue.

What other priorities do you see from customers right now?  

Accounting standards of course remain in sharp focus, with implementation dates fast approaching.

On IFRS 17, there is a broad range of preparedness – some customers are well advanced in their preparations, having performed significant test-runs already. Others have yet to select a vendor and we continue to see strong demand, with our RiskIntegrity™ solution, in particular. This trend is across our actuarial products, as some firms require new techniques, for example, stochastic modelling for liability valuation. 

LDTI preparations are clearly ramping up, and there again we see demand for software solutions too.  Whether for LDTI or IFRS 17, firms seeking a solution - with little time to spare - can benefit from our vendor-maintained SaaS offering, which allows firms to capitalise on the methodologies we have developed, and the implementation experience we have gained. 

Looking beyond accounting standards, what are you doing that is new and different for insurers?

The significant development is our agreement to acquire RMS, the leader in climate and natural disaster risk. Over the last decade, we have built a strong business in the insurance space, with customers across the industry. However, it’s fair to say that our offering has been oriented more to life and annuity providers, than P&C.  

This acquisition will change that, adding a core P&C capability. We see breadth of capability as a real strength that enables us to deliver comprehensive solutions. Well, this investment will take that to the next level.

Can you say more on what you mean by integrated risk assessment?

Institutions across all sectors are facing an increasingly complex, interlinked set of risks. Our vision is to enable firms to manage this complexity, through the integration of risk-assessment capabilities across different risk domains - enabling firms to assess these risks holistically. 

To give a practical example, take an insurer or reinsurer, seeking to write business with a new customer.  Naturally, the firm will need to assess the risk to be underwritten – one place where RMS’s analytics have a key role.  

Alongside that though, insurers also need to understand who they are doing business with from a range of perspectives – to safeguard against financial crime, to assess ESG credentials, and to assess credit risk. At Moody’s Analytics, we have developed from a firm focused on one of these to a data and analytics solution provider across all these areas.

With insurers’ unique role in risk transfer and mitigation, we are excited by the opportunity we see to support the industry as it seeks effective ways to assess new and changing risks, such as cyber and extreme weather.  

By doing so, we hope to play our own part in the industry’s work to address climate change.