How to Map Five Hundred Trillion Dollars of Exposure

Across the many different classes of insurance – ranging from casualty liability, specialty lines, trade credit, and surety to agriculture, life and health, and annuity exposure – insurers globally cover an estimated US$554 trillion of total insured value. But a real challenge for the industry is to have a consistent method of monitoring and reporting exposure.

RMS has just completed a two-year exercise documenting all the different types of insurance that are available in the market and creating a classification system for all the assets they protect. This is now published as a data definitions document v1.0 as a standardized schema for insurance companies to have a consistent method of evaluating their exposure. This project, in collaboration with research partners Centre for Risk Studies at University of Cambridge and a steering committee of RMS clients, involved extensive interviews with 130 industry specialists and consultation with 38 insurance, analyst, and modeling organizations.

Insurers are also concerned about several ways that risk accumulations can occur. These include having multiple insurance policies with the same policyholder, having different lines of insurance with clusters of insured value in the same geographical location, and having "clash" risk from underlying events that impact several classes of insurance in a portfolio.

A key point of developing the data schema was to identify concentrations of exposure and to assess accumulation risk by enabling new types of loss models. The project has also delivered a framework for loss modeling by examining three catastrophe scenarios from hurricane, geopolitical, and pandemic events, and it includes a visualization of US$554 trillion of exposure. Read more in the RMS Newsroom announcement.

RMS Voted North America Modeler of the Year 2018

At the Reactions 11th Annual North America Awards in New York City last month, RMS was named 2018 North America Risk Modeler of the Year in recognition of our top performance and innovation in the market. The award underpinned the commitment RMS provides to clients and the market with scientifically sound models, robust data sets, and unparalleled analytical services during a very active 2017 catastrophe season, helping insurers protect and find new opportunities for their businesses.

In a year of the highest insured losses ever, 2017's disasters were especially concentrated in North America with 83 percent, or US$273.9 billion, of overall global losses of US$330 billion. RMS climate risk models, such as the RMS North Atlantic Hurricane Models suite, were relied on to deliver the insights that helped the market to quantify, differentiate, and manage hurricane risk accurately, from the local level to larger portfolio management and capital management decisions.

"We are honored to be chosen by the industry as the 2018 North America Risk Modeler of the Year," said Pete Dailey, Vice President, Americas Climate Models at RMS. "Our approach to modeling and reconnaissance work in the face of Harvey, Irma, and Maria during 2017 emphasized to RMS clients in both the (re)insurance industry and the capital markets that we continue to be a dependable source of guidance offering key data necessary for their businesses." Read the full announcement in the RMS Newsroom.

IAG Makes a Step Change in New Zealand Earthquake Modeling

Insurance Australia Group (IAG), a leading multinational insurer, has licensed the RMS® New Zealand Earthquake High Definition (HD) Model, the world's first earthquake model to benefit from the RMS HD model simulation-based framework. Through modeling tens of thousands of realizations of future earthquake scenario losses, the model is strengthening IAG's ability to perform granular risk quantification as well as assisting in strategic risk management decisions.

Created in collaboration with local experts, scientific agencies, and insurers, the RMS New Zealand Earthquake HD Model is the first to holistically consider losses due to ground shaking, liquefaction, landslide, tsunami, and fire following earthquake as well as post-event loss amplification. Also, it incorporates important lessons learned from the 2010-11 Canterbury Earthquake Sequence (CES).

Dr. Philip Conway, natural peril specialist at IAG, commented: "Following the significant Canterbury and Kaikoura earthquakes, New Zealand now has one of the most technically advanced views of earthquake risk globally. Multivariate models such as the RMS HD platform leverage this large body of science that supports IAG's own internal modeling. IAG has had a long relationship with RMS and we welcome its independent view of risk that provides an important contribution to reinsurance discussions as well as satisfying regulatory requirements. The flexibility afforded by the new platform represents a step change in discrete consideration of earthquake mechanisms." Read more in the RMS Newsroom.

Join Us on Our 2019 Impact Trek

Each year, RMS selects outstanding candidates from our worldwide client and employee base who possess relevant professional expertise, as well as a passion for creating positive impact, to participate in an international trip working with Build Change to bring more resilient housing and schools to catastrophe-vulnerable geographies.

On the 10-day Impact Trek, clients and employees experience the positive work that Build Change is engaging in while simultaneously offering their skill set to aid the organization. Detailed information about our 2019 Impact Trek will be released soon in an email to all clients. In the interim, if you have questions or would like further information, please email [email protected].

A Full View of Hurricanes Florence and Michael

September and October saw significant hurricane events impacting the U.S. as this year’s North Atlantic hurricane season gathered some late momentum. Hurricane Florence was the first hurricane to make landfall in North Carolina since Hurricane Irene in 2011. On September 14 near Wrightsville Beach, North Carolina, Florence landed as a Category 1 hurricane on the Saffir-Simpson Hurricane Wind Scale. Prior to reaching the U.S. mainland, Florence hit major hurricane status (Category 3 or greater), making it one of the most intense storms to navigate north of 30°N in recent history.

RMS estimates that the insured loss for Florence will be between US$2.8 billion and US$5 billion; read the full Florence loss-estimate announcement. This estimate represents insured losses associated with wind, storm surge, and inland flood damage across North Carolina, South Carolina, and Virginia, including losses to the National Flood Insurance Program (NFIP). Read all the Florence-related RMS blogs. RMS clients can view Florence resources on RMS Owl.

If Florence was a stalled, flood-driven event, Major Hurricane Michael blazed a trail from its October 10 landfall as an almost Category 5 storm near Mexico Beach on the Florida Panhandle. Michael continued as a Category 3 event through Georgia, maintaining tropical storm status as it exited into the Atlantic. It becomes the strongest hurricane (by wind speed) to make landfall in the continental U.S. since Andrew in 1992 and the strongest October landfalling hurricane (by wind speed) in the continental U.S. on record. Michael’s minimum central pressure of 919 millibars makes it the most intense hurricane (by minimum central pressure) to make landfall in the U.S. since Camille in 1969.

RMS has estimated that the insured loss from Hurricane Michael will be between US$6.8 billion and US$10 billion; read the full Michael loss-estimate announcement. This estimate represents insured losses associated with wind and storm surge damage across Florida, Georgia, and other parts of the Southeast and Mid-Atlantic, including losses to the National Flood Insurance Program (NFIP). Read all the Michael-related RMS blogs. RMS clients can view Michael resources on RMS Owl.

RMS Welcomes Neil Isford

RMS recently announced the appointment of Neil Isford as Executive Vice President, Sales and Client Development, reporting to Chief Executive Officer Karen White and serving as a member of the company's executive committee. Isford will oversee all aspects of client development, sales, and consulting at RMS, including the global sales, professional services, solutions, and customer success organizations.

Over his career, Isford has been drawn to bringing innovation and technology transformations to key global industries. Most recently, he served as worldwide general manager for Watson Financial Services Solutions at IBM, where he led sales and customer success for a global organization. He helped deliver double-digit revenue growth from a portfolio of new AI and analytics-based industry platform solutions in the areas of financial risk, financial crimes, regulatory compliance and governance, payments, and customer insight.

"Neil is hands down the most customer-centric executive that I have ever encountered,” said Karen White. “His proven track record building global sales and services teams and selling industry solutions, combined with his ability to cultivate great long-term relationships, will have a profoundly positive impact serving the RMS community of clients. I could not be more excited to have Neil on board." Read more in the full announcement in the RMS Newsroom.

EXPOSURE Magazine: Essential Reading in Changing Times

The pace of change continues to accelerate across the insurance industry, and EXPOSURE magazine helps risk professionals explore some of the key drivers. The lead story in this new edition looks at the recent market activity from Tower Insurance in New Zealand, which launched risk-based pricing for customers after adopting high-definition earthquake modeling.

A year on from Hurricane Maria, EXPOSURE examines the slow progress to restore normality on Puerto Rico, and with signs that climate change is moving the climate off the historical baseline, relating to natural perils, what does this mean for insurance and reinsurance underwriters?

EXPOSURE covers a range of issues, from investigating different strategies (re)insurers deploy for structuring modeling operations to new ILS catastrophe flood bonds, upcoming IFRS 17 accounting standards, and the exponential rise of the cloud. Three senior members of the RMS team — Karen White, Moe Khosravy, and Mohsen Rahnama, share thoughts about their collective vision for the company. Visit the EXPOSURE site for all the latest stories and over 40 articles from across the last four previous issues.

Jebi, Mangkhut, Trami…and More: Get the Best Insight on Asia-Pacific Events

From Typhoon Jebi’s landfall in Japan on September 4, Typhoon Mangkhut hitting the Philippines on September 14 then China two days later, through to Typhoon Trami in Japan on September 30, it was an eventful month. These add to a growing list in the Asia-Pacific region over the last few months, from the tragedy of the earthquake and tsunami at Palu in Indonesia on September 28 to the floods in Japan in July and in Kerala, India, in August.

Find insight into all three typhoons on the RMS Blog. Robert Muir-Wood, chief research officer, shares his thoughts on the Palu event; Rajesh Narayan, senior director of product management, discusses the Kerala floods; and our reconnaissance team reports on their findings from Japan’s floods in July. As usual, RMS clients benefit from a wealth of information on these and other events across Asia-Pacific by accessing RMS Owl.

Additional HD Models Now Available via HD Analyzer 2.1 and RMS Analytical Services

This summer saw the release of RMS HD Analyzer Version 2.1 to the market. With the delivery of this application update, licensing clients can now run analyses for the new RMS® Japan Earthquake and Tsunami High Definition (HD) Model and the recently released Ireland and Italy inland flood additions to the RMS Europe Inland Flood HD Models.

For Europe inland flood, the addition of Ireland and Italy brings the total number of countries in the model to 15. Both countries are highly flood exposed, with flood an important peril for their respective insurance markets. In Ireland, flood insurance penetration is high for residential and commercial lines, and the market has seen frequent losses in recent years. Additionally, due to typical meteorological conditions, flood risk in Ireland is also highly correlated with flood risk in the U.K.

Currently, the penetration rate for Italy flood is still low, but with the government offering options to make private coverage more attractive, RMS is encouraged to support market growth. Flood risk in Italy is relatively high, but because of irregular meteo-hydrological conditions, Italy offers high diversification for international players currently writing business in the U.K. and Continental Europe.

To develop the new Japan Earthquake and Tsunami HD Model, RMS worked closely with local industry and science partners to apply the latest earthquake risk modeling innovations, in combination with data from the Tohoku and Kumamoto Earthquakes. This model brings a new level of understanding and insight to managing earthquake risk in Japan by providing a comprehensive solution accounting for earthquakes, tsunami, fire following earthquake, liquefaction, and landslide. The model has been designed to correctly implement all Japanese policy terms and reinsurance structures and, together with the recently released RMS® Japan Typhoon HD Model, delivers the most complete and up-to-date view of natural catastrophe risk for the Japan market.

These models bring important new capabilities within and across markets. They can generate significant value through optimizing reinsurance and capital by millions of dollars as a result of the more complete views of risk, higher-resolution hazard, exposure disaggregation, and correlation insights. The models can be run on RMS HD Analyzer Version 2.1 or by leveraging the RMS Analytical Services team.