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Insuring the Insurers - Leveraging the mainframe to reduce risk
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By Christopher Spaight
WW System z Marketing Manager - Big Data & Analytics
When you think of Switzerland, what comes to your mind? Is it the painstaking craftsmanship and precision of a finely made watch? Perhaps it is the smooth, creamy deliciousness of dark chocolate? How about 15 random digits that unlock a multi-million dollar bank account? It could be any, or all of these. It’s likely that one of the world’s largest reinsurers wouldn’t be your first thought. If, however, you have been unlucky enough to have faced a natural disaster, Swiss Re just might be top of mind.
Founded in 1863, Swiss Re was a joint venture by Helvetia General Insurance Company and the Basle Commercial Bank in response to the catastrophic 1861 fire in Glarus, Switzerland. At that time, insurers were not prepared for the major loss of capital due to the sheer number of unanticipated payouts for property damage, injury and loss of life in the fire’s wake. This showed the challenge that Swiss insurers faced: “how do we handle these grand catastrophic events?”
That’s where a reinsurer comes in. Their purpose is to mitigate the risk that an insurer faces in underwriting policies. Think of them as insurers for insurers. By serving as a safety net, Swiss Re helps insurers retain more of their capital, thus enabling them to extend coverage to more clients. Shared risk equates to shared responsibility, and Swiss Re, while in the background, has been instrumental in helping millions of citizens who have faced the most brutal of hardships to rebuild their lives.
For the majority of the world, global climate change is a reality. This has led to larger and more severe weather disasters. Look back just over the last 5 years. In the United States, Super Storm Sandy batters the eastern coast of the United States and the result is $19 billion in insured damage and an excess of $70 billion in economic losses; Japan absorbs one of the largest tsunamis on record, which displaces 452,000 people to shelters and results in a rebuilding price tag of more than $235B.
As a result, Swiss Re is turning to IBM technology and data analytics to educate insurers on the possible risks and outcomes they face when rebuilding after a catastrophe. Swiss Re understands that their accumulated data, gathered over more than 150 years, is their greatest asset. The key is being able to take all of this historical data – on the order of 3 petabytes – digest it, manipulate it, and use it as a model to help prevent future losses when faced with a similar event. The accuracy of these models is paramount in the education of insurers, cities and private builders on the risks and outcomes they face when rebuilding after a catastrophe.
So, while Swiss Re may not be as well-known as a watch, chocolate or bank accounts, they serve a far more important purpose. In times of need, under the most extreme conditions, Swiss Re provides an invaluable service of helping provide relief to those most in need.
Watch the IBM Engines of Progress video to learn more about Swiss Re and how technology plays such an important role in their ability to rebuild lives and create more resilient and sustainable cities.
Check out all of the Engines of Progress Blogs: