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Moving Beyond ‘Black Swan’ Events

With over 20 years of insurance experience to his name, Graham Taylor, vice president, and AD of business insurance retail, at Travelers Europe, has seen first-hand many of the key events that have buffeted the market in the last two decades.

In a recent leader profile with Insurance Business, he shared some of the milestone moments that have marked his career to date – including seeing the industry’s reaction to 9/11 and watching the market continually navigate hard and soft market cycles.

While it can be tempting to think of shocks to the market as ‘black swan’ events, Taylor noted that these events are defined not by their rarity but rather by the industry’s lack of contextualisation. Looking to COVID-19, which has been referred to by many as a black swan event, he noted that there have been several pandemics in living memory and there will inevitably be several more.

These conversations show the gulf that still exists between risk and risk management, he said, and highlight the importance of using data to its full extent to reduce that gap.

“We talk about [pandemic risk] as if it’s something we never knew would happen,” he said. “But there was plenty of data to prove that it could and would occur. [The question I put to our team is], how many more once-in-a-lifetime events do we need to see before we realize that they’re part of a trend over our lifetime, not one-off events?”

Taylor added that when people talk about once-in-a-lifetime events, it’s all too often in the context of recent history and these discussions do not utilize the full data that is available.

“What we need to do as an industry,” he said, “is make sure that we use the data we have in abundance in the right way to inform us, to provide that laser-focused risk management – from both an internal standpoint in managing our portfolios and managing our capital base, but also utilizing the knowledge that we have in spades within the insurance industry to educate and inform our clients. I believe, in many respects, we have a moral obligation to do that.”

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