Portfolio Management: Making A Difference

Durgesh Vyas, Head of Analytics at Probitas 1492, gives us his take on portfolio management.

“As a syndicate, we talk a lot about discipline within our approach to underwriting. But it doesn’t stop there, as we’re disciplined with our data and analytics too.

Working closely with underwriters on large accounts, portfolios, business planning, and strategy gives us an edge. We’re able to ask challenging questions of their plans, scrutinising the detail by asking legitimate questions and, importantly, adding value to the conversations by sharing our perspective based on the data.

When it comes to the role of Analytics in a syndicate, there are two key components.

First, it’s a sense check and sounding board for pricing. Secondly, it’s driving portfolio management assessment.

We recently carried out a deep dive technical analysis on one of our portfolios, specifically, within the framework of portfolio management. We were looking to optimise this line of business further, working alongside underwriters to identify areas that were performing and, of course, those that were not. It’s a classic example of what we do well at Probitas, where analytics and underwriting symbiotically work together.

But, it’s not just assessing the individual accounts. We take a step back and look at the bigger picture. Constantly collaborating and working together as a team, we discuss options with the underwriters in a collegiate way, enabling us to justify our go forward loss ratios to the reserving team and include them in our business planning process.

As a business function, we want to be proactive, with our ears close to the ground. My vision for the Analytics & Pricing function is no different to how it was originally set up. The goal is to ensure that underwriters want to come and engage with pricing actuaries to drive value in their portfolio management process. To have a top quartile function, we need to continue to be fast, responsive, and forward-looking.

That also sets us apart; we’re nimble and act with autonomy to be fast and responsive. We don’t get tied up in bureaucracy and legacy.

Objective and wholly independent

Whilst we are very closely aligned to what underwriting is doing, we need to arrive at our own objective view to add value to the conversations we’re having with underwriters, from individual accounts all the way up to strategic planning level. That’s important because if we simply become an echo chamber for underwriters, we cease adding value.

In my experience, many pricing functions in the big corporates end up parroting what the underwriter is saying. Things get lost in the politics of the big corporate machines. We don’t get involved in politics in our organisation. Of course, there will be differences of opinion, but those differences are healthy for the business

It means that we’ve got checks and balances in place. It means that people will feel comfortable in putting their head above the parapet to question if something isn’t right or, if it is the right strategy, is that really what we want to do?

At Probitas, from the top down, the leadership welcome questions and challenge. There are forums in place to allow any member of the team to do just that. I think that sets us apart from others.

And the performance speaks for itself. For the past three years now, our performance has set the record straight.  Our attritional loss ratio is not down to luck, it’s down to our discipline.

As we grow, portfolio management continues to be of crucial importance. It is moving away from thinking about individual risks, and starting to think strategically about the mix of portfolio, the segmentation and the mini strategies that sit alongside the bigger picture. For me, this highlights how important it is to have analytics working seamlessly with underwriters.

Probitas is well-positioned because we have good quality data. In the insurance market, there is no getting away from it; data is king. If you have poor data, you will struggle to make sound business decisions, particularly when you are trying to optimise your portfolio.

We’ve been extremely particular with our data, in the collecting of it and the maintenance of it. We’ve cultivated our data carefully, investing in it to ensure we can confidently rely upon it. And it’s not about fancy or expensive systems. What we have done is keep things simple, so that we can focus on doing it well.

We’ve got databases for pricing models hooked up, conformed, and stored within our data warehouse. It sets us apart from our peers. Very few syndicates have been able to establish a data warehouse from inception. Our data warehouse is really evolved; it’s the place for all data, one version of the truth that allows underwriters to be able to monitor their own portfolios. And enables others within the business to interrogate, ask those interesting or challenging questions and deep dive into strategies.

There are still carriers out there that struggle to piece the data together because they have so many legacy issues. We’re unencumbered by that because we’ve been very careful with how we’ve established the syndicate.

We should also acknowledge the work Lloyd’s has done here, particularly formalising and introducing portfolio management into the minimum standards. Formalising it and requiring evidence, ultimately instils greater discipline, holding underwriters, executives, and boards to account.

The benefit for us is, as Lloyd’s starts to ask interesting and challenging questions around portfolio management, we’re able to confidently evidence, with reliable data, our plans. We’re able to build concrete cases for pre-emption – both quantitative and qualitative.

It certainly takes more than words to get a business plan signed off. If you can’t demonstrate with data quickly, make changes on the fly, then you’ll struggle because it will leave Lloyd’s with more questions. You need to deliver repeatable evidence – something that we’ve been able to do well.  The proof is in the pudding – as we’ve had two pre-emptions signed off in the last two underwriting years, because we’ve been able to evidence why our growth plans are appropriate and valid. That comes down to a strong business plan, stringent portfolio management, and confident strategies backed by quantitative data.

At the end of the day, plans are just plans. Execution is key. So, it’s exciting to watch the dedication and focus from the teams as we deliver on our plans and see the syndicate continue to make a difference.”