Building Risk Engineering from the Ground Up: How BHSI Is Giving Underwriters the Confidence They Need to Tackle Risk
Risk engineering requires a dedicated team of professionals who not only understand the risks clients face but can also address those risks and communicate them to underwriters.
At Berkshire Hathaway Specialty Insurance, building its risk engineering practice started with a desire to make this communication between engineer and underwriter as consistent and clear as possible.
“As we set out to build the practice, we were guided by a foundational tenet of simplicity over complexity in order to drive consistency across North America and globally,” said Doug Johnson, vice president of risk control, energy and construction at BHSI.
That meant creating a system where the tools used, the grading system for risk factors, and the application of loss estimates all aligned across the organization.
“At the start, we had few systems and no tools,” Mike Rendich, vice president of risk control – general property, North America, BHSI, said. “A challenge, for sure, but also a wonderful thing, because we had nothing constricting us on what we wanted to do.”
Now, six years after the BHSI team began its risk engineering practice, the team is sharing what they’ve found to be the key steps to success.
BHSI’s Risk Engineering Beginnings
Crucial from the start, Johnson, Rendich and the BHSI team knew its risk control practice had to be in line with BHSI’s underwriting philosophy.
“We don’t buy reinsurance,” Johnson explained. “So, all the dollars that we place on a risk are net to BHSI. Therefore, we need to be extra diligent in our risk review process.”
Added to that, the group started with just a few risk engineers.
That led to setting a main goal: Their job was to create a risk engineering review process that supported the BHSI underwriters and helped the underwriting team make informed decisions. At the same time, they needed to make the most efficient use of limited risk engineering resources.
“Risk control couldn’t be just a checkbox; we had to home in on the areas where we could add the most value,” said Rendich. “This required collaboration with underwriting to focus our resources where greater understanding was required to underwrite the risk.”
That started with drilling down on confidence.
Why Instilling Confidence Is Crucial to Risk Engineering
In the world of risk and insurance, certainty is all but certain. Things change and grow and shift every day, so staying on top of how the industry is evolving has become a key component of strong underwriting.
That is also why confidence has become a key metric for the risk engineering team at BHSI.
“Understanding a customer’s risk management culture can instill confidence in the underwriting team,” said Johnson. This requires BHSI to be comfortable with the third-party information on which the team bases its analysis. In addition to assessing the information, BHSI’s engineers are also evaluating information quality.
From there, the risk engineering team can provide underwriters with both the information and conversation starters they need to underwrite risk.
“It’s important that we’re transparent about what we know and don’t know when communicating our risk assessment,” added Rendich.
“Because we use third party sources,” Rendich continued, “we need to scrutinize the data in order to identify gaps in understanding.”
The Long Term Proposition
BHSI is committed to the long term and the team is building its risk engineering practice to support that commitment. It does this by ensuring a disciplined and consistent engineering approach across all regions and by continually improving the depth of the team’s understanding of customers’ risks.
“It is key that we are consistent in our engineering standards and processes,” Johnson said, which is why the team felt it important it have common applications, tools and deliverables across the globe.
“Being long term focused allows us the time to grow our understanding of the risks year over year and become more confident in the assessments we provide to underwriters,” Rendich said.
4 Key Elements to Building a Successful Risk Engineering Practice
According to Rendich and Johnson, four key elements are foundational in building a risk engineering practice and vital to its long-term success:
1) Support from Senior Leadership
“Having the support of senior leaders,” Rendich explained, “enabled us to have the latitude to do the things we needed to do to build the practice.”
This is something that came in on day one and has continued through today.
Working together didn’t stop with support of senior leadership. Collaboration between several departments was key.
“This is an organization that has a non-siloed approach,” Rendich said. “Collaboration,” Johnson added, “goes beyond underwriting. We’re talking claims, actuarial, and our catastrophe engineering and analytics teams — everyone has to be a part of finding strategies and solutions.”
3) Bringing the Right People to the Table
“It is critical that early teammates bring a strong knowledge base and buy in to the company’s proposition,” Rendich said. At BHSI, risk engineers brought to the platform have all had extensive experience and a desire to be part of a team that could build a world-class practice.
“At BHSI, we seek teammates with both capabilities and character,” Rendich continued. “We are proud of the team we have assembled.”
4) Be Open to Ideas
With the team in place, senior leadership’s support and collaboration across multiple specialties, it is important that everyone is open to ideas.
“Again, it goes back to the non-siloed approach,” said Johnson. “As we’ve grown and developed, risk engineering has found success by being open to feedback from all stakeholders who share the vision of a forever company.”
Working to Continue the Wins
Looking ahead, Johnson and Rendich agreed that the next steps for BHSI’s risk engineering practice is continued development and improvement.
“We host an annual risk control meeting, in which we have the opportunity to bring together risk engineers from across the globe,” Johnson said. “That helps drive the consistency and collaboration piece.”
Even this year, with so many travel plans uprooted by the global pandemic, the BHSI risk engineers are planning global virtual meetings to keep the conversation going, with hopes of having in-person meetings again soon.
In addition, BHSI is constantly looking at ways to improve upon the processes it already has in place.
“We are comfortable scrutinizing our process, especially when losses occur,” said Johnson. “We work to make sure we’re making the best decisions, while recognizing that building a successful practice is an ongoing endeavor.” &