Catastrophe Risk

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In a world of ever more elaborate and ridiculous job titles, Ellen Gyandzhuntseva has a title which is both brilliantly simple and descriptive. “I’m the team manager for catastrophe,” she says.

“We try to model the probability that catastrophic events are going
to occur and assess the losses we are going to incur from these events. Not just for us either, but also for the companies that are our reinsurers.”

There are, she adds, a broad range of possible catastrophes that her team models. “It could be hurricanes hitting Florida, it could be earthquakes in California or it could be flooding in Thailand.” Nor is it all natural disasters, “It might be a cyber attack or two cruise ships colliding.You always have to think outside the box and ask yourself what else could be out there. It’s very interesting.”

Interesting too is Gyandzhuntseva’s journey into the insurance industry which was far from conventional. “My family is half Armenian and half Russian and I was born in Azerbaijan when it was a part of the Soviet Union,” she explains. Azerbaijan became independent when the Soviet Union collapsed in the early 90s. But the country has a long-standing conflict with neighbouring Armenia, which has resulted in several conflicts. Ethnic cleansing in 1989 resulted in her family leaving the country,“We moved to Bulgaria and I grew up and went to school there.”

From Bulgaria, she went to university in New York where she studied insurance as a degree. “If you talk to people in insurance, very few of them actually intended to go into it – they knew someone who worked
in the sector or they wound up in it by chance.” She proactively chose the industry whilst she was applying to American universities when living in Eastern Europe and “I knew I enjoyed maths, I liked thinking about risk and I wanted something where I could use that.”

During her degree, she did a few internships which confirmed her interest. These also led to her first job with Guy Carpenter, which is a reinsurance broker based in New York “I started out on the analytics team doing modelling.” After three years, she decided she wanted to return to Europe so relocated to London. Three-and-a-half years later, she moved from Guy Carpenter to Chaucer.

“This was an interesting transition for me because working for a broker is very different to working for an insurance company. At a broker, you see many portfolios, many different clients, and many different insurers and reinsurers – but you only see one aspect of what they do. If you are working in an insurance company you get to see everything from all angles.”

She also enjoys the holistic nature of thinking about catastrophic risks and their fallout. “You could have an event like a meteor impact as a named peril on a policy. As an insurer you would have to ask yourself ‘How on earth do I model something like that?’ There are an incredibly broad range of consequences that you potentially need to consider.” The COVID pandemic, she notes, is a good real-life example of how a catastrophe plays out and the innumerable knock-on effects in a world that is made up, increasingly, of interconnected systems.

Like many who work in insurance, she points to this complexity and the data it generates as one of the great drivers of change in her sector. “Data analytics have definitely taken a more prominent role in insurance. They have become a bigger part of everyday decision making and more important in portfolio underwriting and management. People are trying to utilise all the technical expertise available to them to come up with the most robust models – and these tools and models and analytical capabilities are being incorporated into everyday decision making.”

Although this has resulted in significant changes already, the rate of change is likely to accelerate, not least because the amount of data in the world is growing exponentially, as is our ability to manipulate it. All this is also affected by market forces and regulators.

Even so, not everything is down to technology and data. Some of the future changes she envisages are as basic as insuring those who do not currently have insurance. There are still large numbers of uninsured and underinsured organisations and individuals all over the world. Often these are found where you might expect them to be – for instance, companies in countries like India which are being drawn into the global economy and are increasingly subject to regulations. But sometimes they are in surprising places – large numbers of Californians do not have earthquake insurance.

Of course, the big growth area for those in catastrophe insurance is climate change as more frequent and extreme weather events affect everything from crops and livelihood to infrastructure and travel.

“You’re going to see liability on the back of climate change as well as growth in liabilities in areas like property losses.” What’s more, these risks feed into and react with other societal developments. “People evolve new habits and the world changes – and risks change.”

One instance of this kind of nexus of factors has been real estate in Miami. Here, the super-prime market has boomed in recent decades meaning there is far more very expensive shoreline properties. But this has happened in tandem with an increased risk of hurricanes and sea level rise – and very rapid population growth. The result, for insurers, is a fast-evolving liabilities landscape. “Social and physical changes will present the need for a wider range of insurance products.”

“For these reasons”, says Gyandzhuntseva, “insurance modelling will continue to present challenges” – and her decision long ago to go into the sector was the right one. Everybody needs some sort of risk management and what they need is always changing. “You never stop learning and you never stop thinking.” Perhaps, in the future she might move more into the business and client side of things, “as this is an area I don’t really know.” And if she had to pick a completely different career? “Interior design – it’s always been a secret passion of mine.”