In late 1992, in the aftermath of Hurricane Andrew a sinking realization entered into the property insurance market…we didn’t know where our exposures were!…nor had any clue about what we knew about those exposures…even if we had known where they were located!!! (No story quite captures this realization than Michael Lewis’ In Nature’s Casino New York Times Magazine Article – especially this quote about projected losses the morning of the storm- “A few mobile homes and an Air Force base — how much could it be?”.
It ended up being $15 Billion (1992 dollars). A recasting of the event using catastrophe models estimates this event could cause $125 Billion in insured losses!
In property insurance, we pass along our property data in Statements of Value (SOV). Globally, these are almost entirely Excel spreadsheets. That means that very few look the same. There are standards, but no one abides by them, because…Excel (and its too hard??). This creates a massive problem for property insurers and everyone else that is in a risk bearing capacity. Namely, how do we know if the data in the SOV is accurate. How do we know if the property is truly located in New York City (where lender is) and not in Miami, FL (where building actually is)?? That was one of the true stories that emerged from the Hurricane Andrew fiasco. It’s been 3 decades since Andrew and guess what…not much has changed.
Two years ago, Vivek Sablani sought to fix this problem. He took it one step further. Not only should the data be accurate, but since the data is already in Excel, the cleansing and scrubbing of that data should be done in Excel as well. And that Excel sheet should be able to output (or API) to any CAT model for modeling. In this episode of Profiles in Risk (E475), Tony chats with Vivek Sablani, Founder and CEO at Wizard Analytics. They enable underwriters to properly digest and analyze Statements of Values (SOVs) even if they have tens of thousands of locations. They can also plug into all your data subscriptions to enhance the SOVs. This not your father’s cat modeling!