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AIG

IHS SPECTRUM Excellence Award

AIG Makes Informed Geo-Political Risk Selection Decisions to Deliver Greater Value to Clients, Gain Competitive Edge

One of the world’s largest insurance companies expedites risk selection decisions to serve clients better by using best-in-class global information in its internal models. For instance, the firm gave 328 underwriters access to geo-political risk scores for every 500m2 sector of the earth’s surface and risk assessments for 6,400+ terrorist targets in 90 countries.

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Challenge

  • Understand relative geo-political risks for countries and jurisdictions worldwide
  • Balance capacity and price to meet the needs of clients while avoiding losses
  • Support underwriters in making timely and effective risk selection decisions

Solution

IHS Country Risk Analyst Service and
IHS Foresight Risk Services – including
IHS TerrorRisk; IHS Foresight Location Analytics

Results

  • Provided 328 company underwriters with access to:
    • Geo-political risk scores for every 500m2 sector (0.12 acre) of the earth’s surface
    • Risk assessments for 6,400+ terrorist targets in 161 cities in 90 countries
  • Reduced research time and expedited risk selection decisions to serve clients better
  • Saved significant time/money required to develop in-house research resources
  • Strengthened market position with informed strategies for higher growth and lower losses
  • Driven value for clients beyond insurance by providing additional business insights on unidentified risks that threaten their business, while developing practical solutions to mitigate or eliminate these risks

AIG: Informed Geo-Political Risk Decisions Deliver Value

Keeping up with geo-political risk factors all around the globe is a vast and never-ending process, but simply part of doing business for insurance leader American International Group, Inc. (AIG). AIG serves more than 90 million commercial, institutional and individual customers worldwide with a network of 65,000 employees in more than 100 countries and juridictions.1 A broad variety of commercial clients – from mid-size companies to 99.6% of FORTUNE 500 companies – rely on AIG to protect their businesses against any number of contingencies, from natural disasters to terrorism to the impacts of economic fluctuations.

“AIG is in just about every country and jurisdiction that you could possibly operate in today as an organization,” said Lou Frascotti, Commercial Property Large Limits Executive and Global Property Terrorism Practice Leader for AIG. “We have to understand the geo-political situation at our client’s locations on a granular level in order to make risk selection decisions that balance the needs of our clients and our company’s stakeholders.”

Trying to track so many different risks in hundreds of areas around the world – many with rapidly changing environments – can be a daunting task, requiring a level of geo-political research above and beyond the company’s core area of expertise. More specialized country information is necessary in order for AIG to be their client’s most valued insurer and make timely, effective underwriting decisions.

Balancing Capacity, Pricing on Every Decision

Today, AIG’s Global Property, Political Risk, Global Marine and Global Security Operations Centre groups all rely on information and insight from the IHS Economics & Country Risk (ECR) team.

AIG subscribes to the IHS Foresight Risk Services with Location Analytics, enabling the insurance company to base its analysis on precise and independently determined risk scores regarding war, terrorism, civil unrest and political violence for every 500m2 sector (0.12 acre) of the earth’s surface. AIG also subscribes to IHS TerrorRisk, which provides 328 Global Property underwriters, CAT modeling analysts, and risk engineers with location-specific intelligence about more than 6,400 terrorist targets in 161 cities in 90 countries. By tapping these combined resources and drilling deeper as needed – e.g. checking to see what is behind a given risk score – AIG underwriters are able to make fully informed decisions for terrorism risk underwriting.

“IHS information and expertise helps us select the risks we want to write, deploy the correct amount of capacity, and set pricing on each terrorism policy,” Frascotti said. “We reference the relative risks reported on by IHS when determining capacity levels in certain geographic areas.”

We trust IHS information and expertise to help us select the risks we want to write, deploy the correct amount of capacity, and set pricing on each policy….

Lou Frascotti,
Commercial Property Large Limits Executive and Global Property Terrorism Practice Leader, AIG

For every underwriting decision, AIG underwriters run their own advanced, internal models that take into account numerous factors affecting risk. For geo-political risk, the team built a custom model around the scoring from IHS. Using this model and weighing other factors affecting risk, they arrive at the optimal ratio of capacity to price. Leveraging best-in-class IHS information in their internal models has helped AIG heighten the efficiency of their own analytic work processes while also helping to ensure compliance with good corporate governance around their underwriting decisions.

Avoiding Losses – Determining True Risk

Since geo-political risks are too complex to be understood by a quick check of the day’s headlines, AIG values the IHS ability to go deeper to determine true risk – allowing the company to make more educated underwriting decisions both for their clients and for the overall risk transfer. The detailed information and insights from IHS enable AIG to engage with clients on a more meaningful level about security-related risk factors. By helping identify and reduce exposure to unforeseen risks, AIG can enhance the overall value it delivers to clients.

“If IHS tells us that a certain investment is in a high-risk area, then we can go into client discussions with a heightened awareness of what questions to ask and what risks to address,” Frascotti said.

In addition to individual policy decisions, AIG uses information from IHS to establish and maintain broader country guidelines for underwriting, giving its underwriters a consistent, sustainable means of assessing risks. AIG’s senior management team also utilizes IHS information to develop and adjust AIG’s own business growth strategies.

“IHS allows us to identify the trends in any particular country or market, and make real time decisions to enter markets more robustly or scale back business in a certain area as geo-political conditions change,” Frascotti said.

Expediting Decisions and Adding Value

For years, AIG underwriters have relied on IHS as a primary source of geo-political risk information and insight. Partnering with IHS, capitalizing on its specialized resources and expertise, has helped AIG reduce research time and expedite decisions in order to better serve its clients and optimize critical workflows. More importantly, intelligent information about geo-political environments across 100+ countries supports AIG’s strategic portfolio management.

“An integrated approach helps our decision-makers operate more efficiently and confidently in complex, dynamic environments,” Frascotti said. “We have the insight to professionally manage our portfolio so that we are in a better position in the market, with lower losses and increased client value.”

Deeper knowledge of varied and ever-changing geo-political climates gives AIG a competitive edge in global markets where success depends upon the company’s ability to not only set prices effectively but also establish broader working relationships with its business clients.

“We can drive meaningful value to our clients outside of just providing an insurance policy and managing risk,” Frascotti said. “We bring knowledge that can influence many other aspects of their businesses and that uniquely positions us to grow our business with capabilities that can differentiate us from the rest of the market.”

1 http://www.aig.com/ key-facts-and-figures_3171_437852.html

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