AI + computing power = exciting developments for ILS: Adrian Jones at Convergence


Speaking at the Convergence event in Bermuda today, Adrian Jones, a former partner at HSCM Ventures, the venture capital business affiliated with Hudson Structured Capital Management, highlighted the artificial intelligence opportunity for the insurance-linked securities (ILS) industry, but also cautioned the ILS sector to take care with data.

Jones started by explaining the rapid increases in capability that have been seen in computing power and software, explaining what artificial intelligence (AI) is and is not, as well as the massive advances made in processing power with GPUs.

He then turned to talk about the relevance of AI for the insurance, reinsurance and ILS community, saying, “There are some interesting specific use-cases around cat modelling, which obviously is very important for ILS.”

But Jones went on to caution, “My message to ILS managers here is, it is very important to understand how the information that you are using is getting generated, or that your cedents are using is getting generated.

“So, if they are writing property insurance, do they understand the characteristics of every single property and how do they link that then to their broad cat models?

“If you’re writing something more casualty oriented, are they using straight-through processing and if so, why and how? What data are they bringing in?

“Understand what’s going on at the primary carrier level, how it translates to reinsurance and how it ultimately ends up in ILS. Because there’s a lot going on with data that I think becomes very important for understanding losses.”

He went on to explain that, “Understanding the property characteristics at the point of underwriting becomes really important and you can do that with AI.”

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Jones then showed some examples of property data analytics and modelling tools that utilise advanced technologies such as AI, saying, “you can see the massive improvement here.”

“There’s a lot of potential implications for what this means in cat modelling. To make the top-down, the overall view of the entire world and how all the disasters are going to impact a particular property, but also understanding that particular property,” he continued.

Saying, “We’re at the point where computing is allowing us to do that and that to me, from an ILS perspective, is a really exciting development.”

He went on to reiterate the importance of understanding how data is generated, saying, “You really have to understand how people are using this technology at the primary carrier level and at the reinsurer level.

“ILS investors should seek to understand how it is being used at the level of the primary carrier and the reinsurer.”

Also read:

– Responsible investors still require a minimum return: Convergence 2023.

– Significant investor interest. A wall of money, but slower moving: John Seo at Convergence.

– ILS market size matters. We need to make it scalable: Convergence panel.

– The “most pronounced” risk-adjusted ILS returns: Tangency’s Stanton at Convergence.

– Bermuda remains world-leader for cat bonds, ILS and Convergence.

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