HailCalc Europe

HailCalc Europe

In response to a growing insurance industry need to quantify and manage catastrophe risk, RMS has acquired HailCalc Europe, the first fully probabilistic hail loss simulation software for Europe. The model was built by a team of atmospheric scientists and underwriters in conjunction with Swiss Re, and has been actively used to assess hail risk since 2004

Europe Hailstorm

Hail produced by severe thunderstorms can cause severe, though localized damage in Europe, which is usually covered in standard windstorm policies and therefore contributes significantly to the average annual loss in this region. Much of central Europe is prone to severe thunderstorms during May to September, particularly around the Alpine foreland. The risk from this peril is highlighted by the Munich hailstorm event in 1984, which caused more than €1.5Bn damage in today’s values, around half of which was insured. As insurance penetration has since increased and property values at risk continue to rise, the expected losses from a similar event today would be much higher. While such intense hailstorms can occur every two to three years, the narrow footprint of severe damage means that the probability that such an event passes over a densely urbanized area, generating large insured loss, is much lower.

HailCalc Europe originated in 2001 from research into the relationship between radar measurements and hail losses in Switzerland. A unique method takes hail kinetic energy, derived from radar data and translates this into hailstorm footprints. Hail kinetic energy represents the time-integrated volume of hailfall in a particular location that can be directly related to the intensity and extent of hail damage. The original researchers collaborated with Swiss Re to extend the methodology across Europe, blending this innovative methodology with Swiss Re’s wealth of expertise and large volume of claims data to derive damage functions. The model has been designed for portfolio EP loss analysis for reinsurance purchasing. A catalog of nearly 2,000 historical hailstorms was developed from operational radar data and combined with additional climatological and meteorological data to generate the stochastic event set on a 3 km-x-3 km grid spanning eight European countries.

RMS’ acquisition of HailCalc Europe complements the latest RMS Europe Windstorm Model, which includes a separate component to model wind-related losses from severe thunderstorms in addition to winterstorms. For some countries, hail losses can total up to over a third of the average annual loss from winter windstorms. The combination of the two models will uniquely enable RMS clients to assess their risk from key sources of windstorm loss. Regionally-based insurance companies with business in hail-exposed areas will particularly benefit from the addition of severe thunderstorm loss modeling to the long-established RMS suite of peril models. The model will also be highly valuable for auto insurers as auto claims can contribute to up to 70% of hail damages.

Model Highlights

	Stochastic event set generated from a comprehensive database of 1,800 historical hailstorms derived through complex processing of operational radar
	Hazard and risk modeling are carried out at high resolution on a 3 km-by-3 km grid and allow correlation of risk across multiple countries
	Vulnerability model development work carried out in partnership with Swiss Re, providing access to inventory information, insured exposure and claims data
	Models leading lines of business for each country: Residential, Commercial, Industrial, Agricultural and Auto
	Validated using detailed loss data from recent events

Geographic Scope

HailCalc Europe covers the following eight countries: Austria, Belgium, France, Germany, Italy, Luxembourg, Netherlands, and Switzerland.

Exposure Data Resolution

HailCalc Europe incorporates a different geocoding technique than that used by the RMS models. For all modeled countries, only exposure data aggregated to CRESTA - or country-level is supported. During data import, HailCalc Europe disaggregates the imported exposure onto a 3 km-by-3 km grid using inventory maps developed with Swiss Re. The loss calculations are performed at this grid level resolution and are re-aggregated for output.

RMS provides HailCalc Europe as a standalone software platform, separate from RiskLink^® and RiskBrowser^®, in its original format without any modifications. As part of the version 7.0 release in Spring 2007, functionality will be included to allow users to import HailCalc Europe losses into RiskLink to group hail losses with any other RiskLink modeled losses and apply required treaties. Future RMS research and development will focus on upgrading the peril model to enable location-level loss modeling and fully integrate the model into RiskLink and RiskBrowser.