Integro uses data analytics to give mid-market client key insurance tip
Reprints
Integro Ltd. recently used data analytics to help a middle-market client with Midwest energy distribution operations hedge the risk of an unseasonably warm winter on its business income, said Patrick Gallagher, managing principal and chief actuary in the broker's New York headquarters.
“We did an ad hoc analysis, collecting 100 years of weather data to develop a simulation model to determine the likelihood of the winter being warmer than a certain level,” he said. “We found that every one degree (warmer) per day cost them $15,000.”
Using that information, the client “decided to put the risk in their captive (insurer) and then purchase a derivative reinsurance policy” that will reimburse the captive for claims that are paid, he said.
Integro actuaries ran into a few hurdles in performing the analysis. For example, two months of weather data, taken from a Midwestern airport, was missing during every summer in the 1920s and 1930s, Mr. Gallagher said.
“We determined it was because the employee responsible for data collection went on vacation during those times and there was no backup,” he said. “So we found some alternative data sets and cleaned up the data.”
Mr. Gallagher said Integro provides similar analytics for other middle-market clients.
“With the proliferation and creation of more and less expensive data, we can provide information about a client's risk that can impact their business strategy rather than merely identify some kind of downside risk,” he said.
Read Next
-
More brokers sharing critical big data insight with mid-market clients
After decades of gathering and warehousing data on insurance purchases, exposures and claims from their commercial clients, more insurance brokers are offering to share the power of their “big data” sets with their middle-market clients.
