EMC Insurance Companies is a property/casualty insurer with around 2,400 employees operating from 19 offices across the United States. In recent years, EMC has partnered with innovative start-ups to leverage the power of internet-of-things (IoT) sensors, drones, aerial imagery, computer vision and machine learning to provide policyholder risk control services, improve underwriting risk selection, and reduce losses in all major lines of business.

These include partnering with a company that uses aerial imagery of rooftops, taken from aircraft, to help better understanding property risks by detecting issues with the roof and to calculate a “roof score” to help underwriters with their assessment. EMC also uses drones to provide roof assessment service reports for policyholders. More detail can be gained from HD imagery from drones than from aircraft imagery, so a more detailed roof score can be calculated.

EMC has strategically invested in wearable safety tech. Employees wear these devices while at work, with sensors detecting temperature, humidity, air pressure, air quality, illumination, motion and physicality (amount of effort being applied). Artificial intelligence in the back end then analyses millions of data points to help identify safety concerns as well as potential production benefits.

Cornish Mutual is a UK general insurer set up by farmers for farmers in 1903, with the purpose of working to protect the farming community, and this purpose is still the same today. Cornish Mutual had tried different approaches to their reinsurance protection. They were not leveraging the diversification benefits of their book of business, having to purchase two different “pillars” of cover at considerable cost even though they had rarely suffered a loss large enough to trigger either pillar, let alone both.

As they worked through Solvency II it gave them much better data at product level and actuarial analysis of their capital requirements, working closely with Willis Re to better understand and articulate the unique nature of their book and reinsurance requirements. They decided to look for reinsurers who would be willing to take time to understand their portfolio and offer a more bespoke solution, considering the diversification benefits and the desire to build a long-term relationship, profitable for both parties.

A new reinsurance structure was introduced in October 2019, and Cornish Mutual has seen considerable financial benefits when compared with the old structure. Willis Re’s detailed understanding of their business model allowed them to offer invaluable guidance on the proposed structure and to introduce additional reinsurers to diversify the placement while optimising coverage and pricing. They also benefitted from Farm Mutual Re’s agricultural experience, particularly in relation to loss prevention. Cornish Mutual’s advice to small reinsurance buyers is to not take off the peg solutions, but instead to look for reinsurance partners who will take time to engage and create a bespoke solution, and to develop long term partnerships built on trust through mutuality.

They collaborated on a plan to develop a stop loss protection providing Cornish Mutual with ample surplus protection while lessening the need of costly, under-utilized reinsurance protections. It was clear that they would not be able to solve every issue or support at 100%, so Cornish Mutual involved their broker partner Willis Re.

A multi-year whole account stop loss, supported by inuring motor/liability and risk/catastrophe excess of loss covers to address the potential volatility of large losses, was identified as the optimal solution. This structure improved all of Cornish Mutual’s key financial metrics whilst maintaining their Solvency Capital Requirement (SCR) within the required tolerance level. The key to the success of the arrangement was harnessing the diversification benefit within the portfolio via the core pillar and cross-participations on the inuring excess of loss covers. Farm Mutual Re participated across all three components of the placement.

Session speakers:

• Chad Veach, Innovation Manager – AVP, Risk Improvement Department, EMC Insurance Companies (USA)
• Paul Mahon, Insurance Director, Cornish Mutual (UK)
• Kevin Cameron, Chief Reinsurance Officer, Farm Mutual Re (Canada)
• James Wenham, Executive Director, Willis Re (UK)
• Greg Lockard, Managing Director, Shelter Re (USA) moderator