Gamma Location Intelligence (Gamma LI) provides cloud-hosted location intelligence solutions for European property insurers, MGAs and banks. The Gamma LI team recently sat down with InsTech’s Ali Smedley to discuss how the company can help with climate risk reporting, its recently created emissions dataset and what ESG trends Gamma LI is observing.
What does Gamma Location Intelligence provide to the insurance industry?
We offer a range of address-matching and geocoding services to help accurately locate a property. Our flagship product, Perilfinder, is a web platform that allows underwriters to visualise and assess both property-level and accumulated risks. Perilfinder can show the various risks individual properties may face such as fire, flood and crime.
In addition to this, we have developed Addresslink, a comprehensive building-level data repository. This system includes a wide range of attributes such as property size, building type, emissions data and heating type, and we are continuously adding more characteristics.
The main other area that Gamma LI specialises in is climate change. We provide clients with information on how climate change will affect the physical risk of their portfolios, which is incorporated into our Perilfinder platform and APIs. We also recently developed a reporting template to help insurers and MGAs respond to regulatory requirements.
What pressures are insurers facing to report the impact of climate change on their portfolios?
Climate change risk regulation and reporting frameworks are constantly changing. Insurers must keep track of EU taxonomy and the Task Force on Climate-Related Financial Disclosures (TCFD) frameworks, amongst others.
It is not just regulatory pressure that is driving insurers’ need to understand the impact of climate change. Climate-related increases in claims are occurring now and are likely to continue. A significant amount of research is currently being undertaken into using climate change models to help underwrite business today. From both a pricing and portfolio management perspective, insurers must understand the impact of climate change now and in the future.
How can Gamma LI help insurers with climate change risk reporting?
The whole market is in flux regarding reporting standards and frameworks. Currently, nothing is mandated for smaller insurers and MGAs. However, requirements will likely be coming down the line and they are still facing pressure to report on their risk by stakeholders. Gamma LI is well positioned to help these companies, either as an ad hoc reporting service or as a provider of reporting dashboards. These can be integrated into existing tools, helping companies understand the impact of climate change on their portfolios at any given point in time. Through our experience in the financial sector we can also provide the necessary data, such as the impact of different RCPs (Representative Concentration Pathways) over various time horizons, for companies to do the reporting themselves.
How does Gamma LI communicate the uncertainty of future climate data?
Transparency is the most important part. There is a lot of uncertainty around RCPs (greenhouse gas concentration trajectories adopted by the IPCC) and SSPs (Shared Socioeconomic Pathways), which are scenarios of projected socioeconomic global changes up to 2100. These are used to predict future climate risk. As part of the onboarding process with clients, Gamma LI helps define their scope, tailors the solution to their needs and educates them on the uncertainties with the data. A lot of the data can be very complicated, so we aim to streamline and simplify the output to clients as much as possible based on their appetite.
What third-party data or modelling companies has Gamma LI partnered with?
Gamma LI works with organisations such as the Ordnance Survey to provide base data, including building outlines. We then work with a range of third parties to provide data via our APIs, including JBA Risk Management and Twinn (previously Ambiental, now part of Royal HaskoningDHV) for flood data, the British Geological Survey and Terrafirma (now part of Dye & Durham) for subsidence data, and Metswift and Aon Impact Forecasting for wind data.
If Gamma LI cannot find a suitable partner to provide the data required by our clients, we build peril models in-house. For example, we created a crime dataset and more recently an emissions dataset based on an EPC (Energy Performance Certificate) model.
Can you talk a bit more about this property-level emissions dataset?
Gamma LI has obtained domestic EPC data for the UK and Ireland, which provides information on the energy efficiency of a given property. Typically this data only covers around 50% of properties, depending on geography. There are also varying levels of accuracy in geocoding, making it difficult to match the data back to individual properties. Gamma LI has created a model to fill these gaps. Energy efficiency and building-level emissions data is modelled using variables such as property type and material. We have been able to validate our model using existing EPC data. We are also currently working on a set of suggested improvements that individual households can use to increase their energy efficiency and reduce emissions.
What data gaps are Gamma LI’s clients looking to fill?
Escape of water is a large area of interest. It comprises so many variables, including building characteristics, temperature, family dynamic and demographic qualities, so it is difficult to get a handle on. The other area we’re seeing a lot of interest in is wildfire. In England there were more than twice as many wildfires in the summer of 2022 than the year before. Gamma LI is working on a wildfire model to try and fill this gap.
What trends is Gamma LI observing within the climate risk and ESG reporting space?
When looking at ESG, the market has tended to focus on the environmental aspect, specifically greenhouse gas emissions. We are beginning to see an increased interest in other environmental issues, such as water scarcity, biodiversity and pollution.
It makes sense that the insurance industry has focused on climate risk and climate change, as it is such a huge source of loss for the industry. Although sometimes difficult to interpret in a meaningful way, there is an abundance of climate risk and emissions data. This is lacking for the social and governance aspects of ESG, which tend to be more qualitative. Whilst the environmental side will continue to be the focus for insurers, we expect to see more interest in the other areas over the next few years.
The other trend we are noticing is that the industry is now investing a lot more time into ESG reporting. With mandatory reporting likely in the future for all insurers and MGAs, along with current pressure from stakeholders, the industry is starting to take the issue more seriously. Companies want to understand how they should measure and report on climate and ESG matters.
What new products is Gamma LI working on over the rest of 2023?
We are always looking to partner with new companies for hazard data, specifically to fill some of the gaps that our clients are mentioning. We are looking to add more building data to our Addresslink product, whether that is actual or modelled data. We are also working on a few different models, such as our wildfire model to be released later this year.
What should readers do if they want to learn more?
Our website is the best place to go - all contact details can also be found there. We’d love to hear from any data or modelling companies we could partner with as well as any insurers or MGAs that could benefit from our solution.
Gamma LI also does a lot of research within the climate risk space and regularly produces white papers, such as Estimating the Potential Impact of Climate Change on UK Property and Flooding in Spain: Present and Future.