In business, risk is simultaneously one of the biggest challenges and one of the greatest opportunities – particularly when it comes to expanding into emerging markets. Fortunately, insurance gives many organizations the peace of mind and protection to move forward in the face of risk.
As “underwriters of the not yet written,” XL Catlin provides property and casualty insurance to clients around the world, from Fortune 1000 corporations to medium-sized specialty businesses. The global insurance and reinsurance company was formed in early 2015 when XL Group acquired Catlin Group Limited, creating a company with operating net income of approximately $10 billion annually. XL Catlin is also the largest Specialty insurer in terms of volume of business written and it holds top-five positions in aerospace, political risk, crisis management and fine art/specie insurance markets. The company is headquartered in Dublin, Ireland with executive offices in: Hamilton, Bermuda; London, UK; and Stamford, Connecticut, USA.1
At XL Catlin, Rafael Docavo-Malvezzi leads the team responsible for evaluating political risk and trade credit decisions across more than 160 countries around the globe. It’s a competitive market that demands a close watch on frequently shifting global political and economic realities.
“What we do for a living is find the good risks in difficult places,” said Docavo-Malvezzi, Senior Vice President and Global Head of Risk & American Regional Manager, Political Risk and Trade Credit (“PRTC”). “Behind any good underwriting there has to be good risk selection, and in order to make those decisions, we need access to a wealth of reliable information. In the past, we used an amalgam of information sources to support our country political and economic risk assessment because we always felt no single vendor could bring it all together. Today, there is one that does.”
Consolidating to One Primary Source
Nearly a decade ago, the XL Catlin PRTC team began working with IHS, tapping into its information resources and expertise to assess political and economic risks. More recently, the insurance industry leader went further and took a step that its leadership team might have once considered unthinkable: XL Catlin gained the confidence to consolidate its approach and rely on IHS as its primary source of geo-political risk information.
“IHS is the only organization I know of that can provide sovereign ratings and broad coverage for all the places that our clients do business,” Docavo-Malvezzi said. “It is a one-stop shop for our country risk analysis and benchmarking.”
Docavo-Malvezzi’s team depends on their subscription to a tailored solution of economic, political, sovereign, and banking risk services from IHS Economics & Country Risk, available on IHS Connect®, to access country and industry risk metrics that they can use to guide underwriting of political risk and credit policies for a broad range of companies and geographic areas worldwide.
The way you differentiate yourself in the market is, one, your expertise and analytical capabilities, and two, the size and length of your cover. IHS is a trusted partner in helping drive the profitability and growth of our business, and basically making us better at what we do.
For each underwriting opportunity, XL Catlin’s analysts factor in IHS risk ratings as well as detailed information behind those ratings before deciding to write a policy or set coverage levels and timeframes that balance risk with profitability. When a decision requires a deeper dive, analysts reach out to IHS analysts to discuss trends and risks in greater detail.
“We can typically derive a true understanding of risk based largely on the scores and information we get from IHS,” said Docavo-Malvezzi. “But we also appreciate being able to pick up the phone and call a specific IHS analyst for a more in-depth discussion. With very granular and specific information about a geographic area, we can be comfortable writing a risk in a country where we otherwise would not go.”
Setting Enterprise-Wide Strategy
Beyond enabling decisions about individual policies, XL Catlin also uses IHS information to establish broader enterprise-wide risk benchmarks for managing country risk as well as formulating individual country and regional concentration thresholds. The country risk framework that XL Catlin has developed covers over 200 countries and is an integral part of the organization’s broader risk management framework.
“We use the country ratings, intelligence, and benchmarks from IHS to help us set overall levels of appetite for exposure within our own organization,” said Docavo-Malvezzi.
Staying abreast of in-depth political and economic information puts Docavo-Malvezzi’s team in a unique position within XL Catlin. “We are often seen by the rest of the organization as a ‘center of excellence’ in understanding emerging markets,” he said, “so we are consulted about various strategic questions – such as proposals for establishing or growing our presence in new regions or industry sectors.”
Streamlining to Increase Profitability
By standardizing with one worldwide information provider for most if not all of its geopolitical risk selection decisions, XL Catlin also increased the consistency and efficiency of its own internal research and evaluation workflows. Teaming with IHS has enabled the insurance company to dramatically reduce the time and expense associated with managing a host of vendors and interfaces.
“I am confident that consolidating our approach has enabled XL Catlin to save at least 20 percent of the cost we previously spent across many different vendors,” Docavo-Malvezzi said. “We can now tell very quickly if a given opportunity offers an acceptable environment to underwrite a risk as well as the level and length of coverage to write.”
Likewise, Docavo-Malvezzi also credits the company’s well-informed risk selection decisions, in part, for helping it obtain affordable reinsurance. Its solid loss history is a key factor in keeping XL Catlin’s own reinsurance premiums lower.
Today, XL Catlin has established a strong track record of profitability2 and market leadership because of its proven ability to make smart risk choices based on best-in-class information and insight.
“The way you differentiate yourself in our market is, one, your expertise and analytical capabilities, and two, the size and length of your cover,” Docavo-Malvezzi said. “IHS is a trusted partner in helping drive the profitability and growth of our business, and basically making us better at what we do.”