Financial modeling use case: Understanding your actual exposure

by Jen Smoldt on June 13, 2019

As the market continues to become increasingly challenging, having an underwriting and portfolio management platform that includes financial modeling is critical to:

  • Staying competitive when underwriting new business
  • Understanding and managing concentrations in order to reduce losses and determine growth strategies
  • Confidently communicating potential catastrophe losses to management teams

SpatialKey’s financial engine is fully integrated throughout our platform from underwriting to portfolio management, and takes into consideration site terms, special conditions, policy terms, and facultative reinsurance.

Here are three ways to use financial modeling to enhance your analyses...

1) Underwriting: Evaluate accumulations prior to binding

SpatialKey gives organizations a competitive advantage by merging analytics and financial modeling together at the point of sale. Looking at accumulations prior to binding helps underwriters determine coverage limits and facultative reinsurance needs for new and renewing risks.

FM model screenshot latest

An “over 50M threshold” flag draws your attention to the prospective risk above. Further analysis shows that adding this risk would increase ground up losses by 1% and net losses by 78%—indicating that perhaps the risk could be written, but it would require considerable policy limits or facultative reinsurance.

2) Portfolio management: Understand and manage your exposure concentrations

Financial modeling is critical in helping portfolio managers understand and manage concentrations, whether the goal is reducing losses or advising where to grow business. Using SpatialKey’s accumulation solution, you can identify policies where additional facultative reinsurance may be applicable or pinpoint locations coming up for renewal that may require new policy terms, additional premium or are subject to non-renewal.


When looking at top portfolio concentrations within a 1 mile radius above, you can see 10 accumulations with exposure exceeding our $150 million threshold.

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Diving into a concentration where exposure exceeds our $150 million threshold, you can see above that facultative reinsurance is netting down exposure by $44 million, but that doesn’t push it below our threshold. With SpatialKey, you can easily see where you need to focus your time and risk mitigation efforts.

3) Event response: Understand your exposure to catastrophic events

While it’s important to understand the total impacted values, you also want to ensure that you’re not overstating losses by overlooking policy terms that may reduce your exposure. This will give you the most accurate perspective on whether you have enough capital to support potential incoming claims.

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Shown above, $653 million of value was impacted by hail 2 inches or greater. When reporting to management, you can consider the impact of policy terms and facultative reinsurance and confidently cap the potential impact at $30.7 million in net losses.

For more information about SpatialKey's financial modeling solution, get in touch and subscribe to our blog for more valuable information like this.


Topics: Event response, Hurricane Data, Hurricane Season

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