Cat modelers take separate paths in search of common standards.

Insurers, reinsurers and other industry executives should use their collective influence to pressure risk data modeling firms to move toward open standards, according to Rick Clinton, the president of Oakland, Calif.-based modeling firm Eqecat Inc.

Noting that he and his fellow modeling firms long have been forcing users to adapt to each of their own proprietary data formats, Clinton said a move toward open standards would allow insurers to assess and manage catastrophe loss exposure more effectively.

"It is not a very efficient process for the industry, as it can discourage the use of multiple models," Clinton said. "For some companies, their true exposure might be revealed by only using one of the models, which might not be the one they've chosen, or it could be that it would only be revealed by using several models."

While most in the industry recognize the potential value of open data standards, Clinton said among the factors that have led modelers to avoid the move have been fears that they might lose a competitive advantage or that they didn't want to bear the cost involved with changing their systems.

According to Clinton, the answer is to support the efforts of the Association for Cooperative Operations Research and Development once it finalizes an open-source property insurance data standard. He added that Eqecat was the first modeling company to accommodate data in the Cresta Plus market standard format for electronic reporting of insurers' exposure data.

"We're committed to the ACORD standards," Clinton said. "I think what that has to mean is that we work toward a multiple platform, flexible import standard with a simple mapping routine where you can very easily map over without reconfiguring your data. The difficulty is getting there."

Uday Virkud, a senior vice president with Insurance Services Office Inc.'s modeling subsidiary, AIR Worldwide, said his company already has provided the groundwork for just such a product with the company's Universal Cession Electronic Data Exchange, or Unicede standard, which distributes exposure data between companies ceding and assuming natural-hazard risk.

Developed after the strike of Hurricane Andrew in 1992, Unicede quickly was made available to AIR's competitors, and Unicede files are used routinely by a variety of non-AIR software applications, Virkud said. He also said he hasn't seen thus far a firm commitment from other firms to similar efforts.

"We've always supported open standards, and we too have worked with ACORD in developing them," Virkud said. "The drive for a standard has to happen naturally, it can't be imposed from the top down."

Paul VanderMarck, executive vice president of products for Newark, Calif.-based Risk Management Solutions, concurred with Virkud, adding that he thinks Eqecat might be "addressing a problem that doesn't really exist."

"The data provided from insurers to reinsurers in standardized electronic formats works incredibly well today," VanderMarck said. "The issue is much more what happens with data transfers between corporates and insurers, which is just an incredibly inefficient process."

The issue is not so much developing a common standard as determining whose standard will prevail, he said.