Hurricanes and earthquakes could be described as the bread and butter of catastrophe insurance and reinsurance.
So having someone on the team with a deep knowledge of the mechanics of earthquakes and how climatic conditions can shift in devastating ways, has clear advantages.
That is what XL Catlin has with Fielding Norton, who has been promoted to the role of group chief enterprise risk officer. He has a long-time interest in the workings of the world that predates his entry into the insurance industry some 20 years ago.
Working in the insurance field was not on his mind when he studied for a degree in science, followed by a master’s in physics and later a PhD in Earth and planetary sciences at Harvard University.
He initially became a teacher of science and maths at a high school near his home town of Kansas City. He had an aptitude for the profession and successfully paid for his last two years at university by teaching on the side.
“I never intended to be part of the insurance industry, that was fortuitous and by accident almost. I’ve always had a heavy interest and curiosity in the sciences and the maths. I’ve done those for ever, and I started as a science teacher,” he said.
However, his deep learning in applied physics and understanding the world’s climate system proved helpful in his transition into the field of insurance. The first step happened in Bermuda when Mr Norton joined the Bermuda Institute of Ocean Sciences in 1995 as it set up the Risk Prediction Initiative, a science and business partnership.
“At the time, my background was useful and relevant because the focus of the risk prediction initiative was to look at these disaster models.,” he said.
“Some of the new Bermuda reinsurers were the sponsors, and they were saying ‘help us understand these models; are they worth anything, are they replicating hurricanes, are they too often or too severe or not severe enough?’ They were asking basic questions that intersected directly with my science background. So in the early days of my career the models were brand new and my background was completely relevant to assess those.”
Unsurprisingly, some of the insurance and reinsurance companies sponsoring the initiative were keen to have Mr Norton, with his extensive knowledge of the subject, part of their in-house team. Offers came his way, and he eventually chose to join Employers Re, a subsidiary of General Electric. The job took him back to Kansas City.
He returned to Bermuda in 2007, as chief risk officer with Ironshore Insurance, and three years later joined XL Bermuda. At the start of the year he succeeded the retiring Jacob Rosengarten as group chief enterprise risk officer; previously he had filled the deputy role.
When asked what a chief enterprise risk officer does, Mr Norton said they help protect a firm to be resilient against any kind of disaster. Just as insurers and reinsurers help clients to weather and recover from man-made and natural catastrophes and threats, so the companies themselves must be in a position “to weather any kind disaster, both in operations, but also in having enough capital and liquidity”.
Mr Norton said: “Our role specifically is to work across the firm to make sure that we don’t have too much exposure to any one thing, whether it is a certain type of event, hurricane or ‘quake, or a man-made disaster; a terrorist attack or cyberattack.
“It is making sure we are aware of our risk and helping management to take risk knowingly — with eyes open — that’s one of the key functions of risk management.”
During the past 20 years the role of risk management has changed.
“When I started there were these brand new catastrophe models that came to light post Hurricane Andrew in 1992, and post Northridge [earthquake] in 1994. Those US wind and quake models at the time were relatively new, now they are more mature and more tested.
“Today, there are many more models and they are still being developed, not just for natural disasters but also for threats we were not talking about ten years ago, such as big cyberattacks. There’s also new technology from a modelling perspective.”
Quantifying the unknown, particularly future man-made perils, “the next asbestos” as Mr Norton describes them, “is something both clients and the industry want to understand; that we can be prepared for it and not be over exposed to it. And also be paid fairly for taking risks like that”.
Mr Norton said: “Twenty years ago there were not really models for that sort of thing, it was more ‘what if’ — our imaginations were pretty limited.
“One of our big themes in enterprise risk management and XL Catlin is to avoid those failures of imagination. We do that partly through partnering with universities and research groups around the world, but also licencing new risk models before they are fully mature or tested and helping to stress them and develop them to see if we can uncover concentrations of risk that maybe more than we would want to the next asbestos, or whatever that is. There will be one, we just don’t know what, how it will manifest and when it will manifest.”
As his career has grown and his portfolio of activities broadened, “day-to-day science” has become less applicable to his role. However, his knowledge of Earth and planetary science still comes in useful and he has maintained his interest and curiosity in the subject.
“It is amazing how many times I find it useful to have that background, such as when people ask questions about climate and whether is the risk growing or changing. The biggest reason I find my background helpful is beyond what I studied, it is more about when to be satisfied with a simple answer and when it makes sense to dig deeper and say the simple answer is not enough.”
Eight years into his career with XL Catlin, Mr Norton said he was initially attracted to the company by its brand reputation, global footprint and the diversity and complexity of its client base and operations, and those distinctions have continued. He likes that even though it has a global footprint it has retained an “entrepreneurial, smallish cultural feel” where people anywhere in the company can talk to anyone else.
Mr Norton is managing director of XL Leadership Council and also a member of the management committee of the Insurance Development Forum, which is focused on closing the protection gap between insured losses and economic losses from natural hazards around the world.