Modern Insurance Magazine Issue 60

INTERVIEWS
SEARCHING
FOR ANSWERS
with Iain Willis,
Gallagher Research Centre
Q
The Gallagher Research Centre
(GRC) launched in September
2022 to support research and
innovation across the full spectrum of
reinsurance. Tell me more about the
key tenets and objectives of the GRC.
How has the evolving nature of risk
demonstrated a need to adopt this wider
remit in recent years?
A
Well, it’s fair to say that we live in an
increasingly dynamic risk landscape.
A number of systemic risks have hit
us in the last few years; Brexit, COVID-19
and the war in Ukraine have all really driven
macroeconomic risk in particular. Climate
risk is also an influence, and coupled with
other evolving and emerging risks, I don’t
think we’ve ever needed research more in
order to really understand some of those
issues.
The question of it all being interconnected
is key; these factors impact all areas of
insurance in quite significant, disparate
ways. The impact of globalisation also
means that events have a much greater
complexity than ever before in terms of
how they impact different insurance lines.
It’s only through research that you really
start to further comprehend that, and
this is an area that we’re keen to address.
It’s clear that you need a lot of different
experts in the room to solve a problem,
and we’re keen to work with those experts
in our search for answers.
Q
How are the findings of your
research enhancing existing models
and risk solutions?
Over the last few decades,
catastrophe models have been
A effective, and super useful when it
comes to understanding a pragmatic view
of risk. If you can model a risk, you can
understand it, you can price it effectively
and close the protection gap, making
insurance more affordable. But we’re facing
significant challenges now, with secondary
perils contributing to much of the damage
and disruption that we’re seeing across the
world.
Take hurricanes, for example. Catastrophe
risk models will generally focus on wind,
perhaps without considering tropical
cyclone-driven rainfall which can often
result in pluvial or fluvial flooding. Models
are generally built around capturing one
single peril; they don’t always capture how
a weather event can graduate and develop
to affect other geographical areas. We
don’t really have models that capture these
transitions, and so we need research in
order to look at the whole, holistic journey
of a weather event. Secondary perils can
often cause much of the insured loss, and
yet they remain somewhat unmodelled.
We tend to find the same issues exist
with manmade perils. A lot of modern
risks just aren’t covered in existing risk
14 | MODERN INSURANCE