Hemant Shah co-founded RMS in 1989 and led the catastrophe modeling firm until 2018, helping to create the modern (re)insurance markets we see today.
In 2018 he co-founded Archipelago, creating an AI-driven risk data platform for large owners of commercial property. He now works closely with corporate risk managers empowering them to use their own data to improve their resiliency and their insurance outcomes.
Insider Engage spoke to Hemant to find out how his world has changed since moving upstream to work with risk managers, as well as how Archipelago is helping solve a perennial problem for the insurance and risk management industry.
After a career modeling risk with insurers and reinsurers, what’s it been like going upstream to work directly with the industry's end-customers – the risk managers of large corporations?
Matt, it’s been really eye-opening.
I felt like I knew the market pretty well doing business with insurers, the reinsurance brokers, the underwriters, portfolio managers, the reinsurers, the reinsurance intermediaries, the capital markets. And what's really struck me is that the industry spends a lot of time talking to itself.
When you go upstream to the industry's customers, it's a whole different vantage point. And you appreciate, I certainly appreciated considerably more, how significant these companies are – they have whole ecosystems they operate within, in which insurance is but one decision they're making when they think about risk and resiliency management.
What's really struck me is that the industry spends a lot of time talking to itself.
For all those years at RMS, my customers’ customers, the corporations that purchase insurance to cover their assets, were just data input into my models.
I’m now seeing the world from their vantage point, and it’s given me a whole new perspective on both the challenges and opportunities across the entire risk management and insurance ecosystem.
What’s been particularly surprising to you?
Although modeling is now pervasive throughout the insurance market, and in many cases powers how insurers underwrite and price their business, most risk managers still view the markets as a black box.
At Archipelago, we recently surveyed hundreds of risk managers, and only 29% said that they were satisfied with their understanding of how insurers priced their risk.
At Archipelago, we recently surveyed hundreds of risk managers, and only 29% said that they were satisfied with their understanding of how insurers priced their risk.
They perceive the modeling and rating tools to be opaque, and feel that they are often reacting to shifting goalposts driven by factors outside of their control.
At the same time they worry that the data insurers ask for, while voluminous, doesn’t quite reflect their risk and what differentiates it from others in the market.
That’s pretty ironic given that many in the insurance industry felt that your models were black boxes too, particularly in the early days.
Don’t get me started!
OK, but would insurers agree with your observations about their customers' concerns?
I think what’s mutual, all around, is a feeling of frustration – that there's got to be a better way.
Take data for instance. Insurers are, often for good reason, skeptical of the data they receive in the submission ‘SOVs’. And, for each and every submission, the spreadsheets aren’t consistent, making it painful to even perform the most basic validations or comparisons. And yet this data is the lifeblood of the entire proposition.
Insurers often get frustrated by this, and they don’t understand why it isn’t easy for the risk managers to provide better and more detailed information about their businesses.
At the same time, the risk managers don’t understand why insurers can’t give them more actionable insight to help facilitate better risk management across their commercial property portfolio.
The good news is, on Archipelago, top risk managers and their brokers are finally able to efficiently onboard high quality, enriched data about their properties. And insures, in lieu of receiving ‘in the wild’ SOVs and a myriad of attachments, are delighted to experience a rapidly growing number of their submissions via Archipelago, enabling them to trust this data, make better decisions, and unlock their productivity.
In addition, this also enables insurers to offer additional insights into the risks being faced by these organisations , which allows for better risk mitigation and risk management. And that can only be good for both parties.
And what’s motivating risk managers to take the initiative?
As I get to know more and more leading corporate risk managers and their teams, the more I’m appreciating that there is a fundamental shift taking place.
The insurance industry’s large corporate customers are digitizing all facets of their business and using data to drive their decisions. They are increasingly cognizant of their scale, and what makes them distinct and not just an ‘assumption’ in another's model.
They’re getting more proactive and analytical about their insurance strategies, consolidating programs, and optimizing retentions and transfer choices. And, the imperatives of climate change, sustainability, and resilience are all widening the context of their approach to risk management.
This is why the insights these risk managers are able to get from their insurers – including those facilitated by the Archipelago system – are so valuable.
In what ways are corporates’ resiliency initiatives shaping insurance strategies?
It’s early days, but I’ve had a number of discussions with my clients about how to synergize their approach to ESG&R with more traditional risk management and insurance strategies. This is a great opportunity for risk managers to elevate their contributions, raise their profile, and align their expertise with C-level sponsorship of resiliency initiatives.
Ultimately, what’s needed are common data-driven and analytical frameworks that can unify and integrate decision-making on what and how to insure and transfer risk, how to assess and increase resilience and sustainability, and how these benefits create ROI to drive mitigation and adaptation.
Do these dynamics pose challenges or opportunities for the insurance industry?
The center of gravity is certainly shifting. For years, risk management has been synonymous with insurance. Risk Managers, well, they have bought insurance. Now, as they get more proactive, for all the reasons we’ve discussed, they are becoming more empowered to more holistically manage risk, viewing insurance as just one important tool to do so.
In our survey, 56% of risk managers reported they are now getting more opportunities to deliver strategic impact and as a result they are increasingly challenging fundamental assumptions.
In our survey, 56% of risk managers reported they are now getting more opportunities to deliver strategic impact and as a result they are increasingly challenging fundamental assumptions.
For those insurers focused on incremental innovations to improve their status quo, these underlying shifts in their customers’ expectations and patterns of demand will be problematic.
And yet I see many opportunities for those insurers who can anticipate these changes, use technology to power customer-oriented solutions, and deliver more actionable, value-added insights.
After all those years at RMS, what’s it been like starting anew with Archipelago?
It’s been exhilarating. And being in a start-up again is also like hitting the gym after a long hiatus, where, ‘ouch’, you’re reminded of muscles you haven’t used for awhile!
I’m working with a wonderful team, have great advisors and investors, and have earned the trust of forward-looking client-partners seeking to drive transformational change in how they do business.
With over $5 trillion in property TIV already on our platform, we’re off to a good start.
