Looking Into The Unknown Using Scenario Planning
A range of factors mean that risk is becoming ever more uncertain for those
in the reinsurance business. Moving into the future, knowing how emergent
markets, political instabilities, the financial crisis or even climate change
will affect the industry becomes increasingly difficult. The only certainty in
the market is that the coming years will bring uncomfortable, precarious and
However, business leaders in the industry of global reinsurance are not
powerless in the face of these unknowns. This Masterclass is designed to help
reinsurers take control of their future through the foresight technique of
scenario planning. This practical managerial tool enables companies in the
risk management to assess any external uncertainties and develop strategies
in accordance with these.
Encouraging managers to scan their environments, pinpoint any areas of
concern, and generate realistic images of the future through scenario planning
helps businesses to prepare for what might unfold and stress-test different
strategies. Divided into a four step process, scenario planning compiles a
range of techniques to enhance levels of anticipation in reinsurance:
1. Identify key external trends and uncertainties through brainstorming
and discussion, teasing out key unknown areas in the reinsurance industry
within an agreed time frame. Carried out within the STEEP framework to classify
2. Determine potential value ranges for the key trends and
uncertainties identified in step one and the possible implications of these
ranges, encouraging participants to engage in dialogue and imagine upsides and
3. Develop alternate scenarios based on the projections from step two,
having participants engage in extensive discussion to select the main scenario
themes, interweaving them into distinct narratives.
4. Evaluate the implications on reinsurance strategies of the
narratives developed in stage three, deciding whether your business is fit to
handle the scenarios through critical assessment of its business model.
Using this four step strategic planning system, managers can evaluate
whether the implications of the narratives generated in step three are unique
or common across many different scenarios, and also understand whether they
will have a major or minor impact on their business. Being able to do this will
allow them to exploit opportunities in the future to develop a sustainable
competitive advantage in the reinsurance industry.
This is the last in a series of seven Masterclasses on global reinsurance;
you can access the
full global reinsurance Masterclass series here.