Monthly Archives: April 2016

Eliminate FOMO (Fear Of Missing Out) – join us at Exceedance

RMS is rolling out the biggest pipeline of products in our history this year, with no signs of slowing in 2017. It’s not just the wide range of regions and perils, it’s also about introducing change environments such as portfolio management with RMS(one) to make decision making easier for our customers when incorporating new views of risk. It is vital that our customers can quickly adopt and then benefit from a great user experience with these solutions, to make a positive impact within their businesses.

It’s this combination of explaining new model developments and the ways to adopt new views of risk that we will be focusing on in 60+ sessions at Exceedance. Even if you know what’s coming up with RMS from a high-level perspective, with a team of over fifty scientists and modelers at Exceedance, we will help to place everything together – perils, regions, and deployment – to benefit everyone within a team managing risk. To illustrate, let’s just take three of the main perils that we will cover and list some of the highlights:

We will open the books on the science behind the 2017 North America Earthquake Model update, and share insight into the scope of enhancements across all model components. We explore the implementation of new maps such as the latest U.S. National Seismic Hazard maps, soil modeling and soil amplification through to geotechnical and vulnerability changes. We will also provide details around our updated liquefaction model through to business interruption and the effect of earthquake sub-perils, such as fire-following and sprinkler leakage.

Research driving the next RMS North Atlantic Hurricane Models update will also be revealed. Learn about the latest insights into the next RMS Medium-Term Rates (MTRs) forecast as we discuss our research in the context of current views within the scientific community. We will also discuss the work RMS is doing to better understand forecast sensitivities and to validate the MTRs ahead of the 2017 model update.

And from the U.S., Asia to Europe, it’s the complete picture at Exceedance, starting from flood peril model fundamentals, including event generation and vulnerability modeling through to the data products they inform, such as flood maps and peril rating databases.

Our solutions for managing North American and European flood risk will be explained, such as using high-resolution hazard maps and data for better pricing and portfolio management, plus many new developments, such as tackling industrial flood risk, flood defenses and real-time climate hazard modeling advances.

There is much more to share, so look at our agenda and I hope you can join us at Exceedance.

Your essential ILS overview at Exceedance

The Insurance Linked Securities (ILS) market is always fast-moving, changing, and evolving. Even in the last twelve months we have seen events such as the emergence of new market players and the increasing convergence between the capital and reinsurance markets, with all this supported by a wave of new innovations.

If you are involved in the ILS sector, want to get involved, or are just interested to find out more about the ILS market, join us at Exceedance. The RMS Capital Markets team has developed five sessions focused on ILS, from general overviews to expert-led panel discussions with respected leaders from the ILS sector.

A good starting point at Exceedance is our session on “Innovation in Risk Transfer,” as we look back at the last twelve months in the ILS sector. An interesting counterbalance has developed with investors looking for new ways to deploy capital, combined with the sector developing new solutions, to address gaps in coverage, infrastructure resiliency, and efficiency of protection.

If you want to hear directly from the market, we have put together an Exceedance panel of industry leaders from specialist ILS funds, rated reinsurers, and hybrid capital providers. Our panel discussion entitled “The Changing Face of Third-Party Capital” will examine pricing, competition, the role of analytics, and how new opportunities continue to drive innovation in an increasingly capital-agnostic sector.

There are also three sessions from our team designed to give you more of a detailed overview into specific ILS-related topics:

  • Bridging the Coverage Gap: ILS capital continues to flow into the industry, and our session will reveal how market participants are driving innovation by designing new types of structures using cutting-edge analytics. These innovations are addressing protection gaps in developed and emerging markets, with market innovation complimenting traditional coverage rather than competing with it.
  • Time Is Money: This session will focus on how new insurance products are being developed around novel triggers designed to permit rapid payment after a catastrophe, enabling hedging of time-sensitive risks.
  • Modeling the Risk and Return of Reinsurance: To address a market shift from cat bonds to more non-liquid reinsurance investments, our session will show how standardized model analytics can provide much-needed consistency in the view of risk, asset valuation, and expected returns.

Join us at Exceedance.

New products and new solutions to discover at this year’s Exceedance

If you are a risk professional that always wants to discover what’s new in our industry, then I’m sure you’d be interested in learning about our new developments: the first RMS high-definition (HD) models, managing novel perils such as cyber, and a total re-examination of more established perils, such as marine cargo.

You can satisfy this craving for the latest thinking, products, and solutions by joining us at Exceedance in Miami this May. With more than sixty sessions plus our general sessions and keynotes, here’s just a selection of the new developments we’ll be covering:

Explore high-definition (HD) modeling

There is a lot of excitement around HD models, representing our next generation of RMS probabilistic modeling, with full-simulation models incorporating the latest technology across all modeling components. You will be among the first to discover our new HD models at Exceedance, with HD modeling powered by RMS(one) for Europe Flood, Japan Typhoon, and New Zealand Earthquake.

It’s not just the models themselves that we will examine; we’ll also look at business-use cases for all RMS HD model components and analytics, from data to maps, and our Model Evaluation Environment, through to portfolio management with RMS(one).

HD modeling at Exceedance

New opportunities from new perils and new models

New perils are always fascinating as they offer growth for those who can harness their potential. To give us all a head start and increase understanding, we have called in leading experts in cyber and terrorism for Exceedance to discuss the latest insights for both these high-profile perils.

While cyber continues to be a serious business threat, (re)insurers’ cautiousness around the systemic nature of the risk sees cyber insurance demand outstripping supply. Matt Olsen, president of IronNet, will give context on the cyber crime environment, with the RMS Cyber Risk team explaining how to assess cyber threat and manage risk accumulations with our new Cyber Accumulation Management System.

Respected terrorism expert Bruce Hoffman will offer his view of a world where extremism is on the rise, as we also show the similarities and differences between modeling a human-made peril compared to traditional natural catastrophe modeling concepts and practices.

Finally, with the sheer scale of global trade seeing accumulations of billions of dollars of cargo at global ports, a new approach to modeling marine cargo insurance is needed. We’ll show examples of sample modeled losses using our new RMS Cargo and Specie Model, explain how to manage a global cargo portfolio, and tackle accumulations in prime risk areas such as ports.

Explore The Lab and Mini Theater at Exceedance

I hope you can join us at Exceedance.

Mangroves and Marshes: A Shield Against Catastrophe?

“We believe that natural ecosystems protect against catastrophic coastal flood losses, but how can we prove it?”

This question was the start of a conversation in 2014 which has led to some interesting results. And it set us thinking: can RMS’ models, like the one which estimates the risk of surge caused by hurricanes, capture the protective effect of those natural ecosystems?

The conversation took place at a meeting on Coastal Defenses organized by the Science for Nature and People Partnership. RMS had been invited by one of our leading clients, Guy Carpenter, to join them. The partnership is organized by The Nature Conservancy, the Wildlife Conservation Society, and the National Center for Ecological Analysis and Synthesis.

We were confident we could help. Not only did we think our models would show how biological systems can limit flood impacts, we reckoned we could measure this and then quantify those benefits for people who calculate risk costs, and set insurance prices.

RMS’ modeling methodology uses a time-stepping simulation, which relies on a specialist ocean atmosphere model, allowing us to evaluate at fine resolution how the coastal landscape can actually reduce the storm surge—and in particular lower the height of waves. In many buildings the real weakness proves to be the vulnerability to wave action rather than just the damage done by the water inundation alone.

The first phase of RMS’ work with The Nature Conservancy is focused on coastal marshes as part of a project supported by a Lloyd’s Tercentenary Research Foundation grant to TNC and UC Santa Cruz. Under the supervision of Paul Wilson, in the RMS model development team, and working with Mike Beck who’s the lead marine scientist for The Nature Conservancy, the project is focused on the coastlines, which were worst impacted by the surge from Superstorm Sandy. The irregular terrain of the marsh and resulting frictional effects reduce the surge height from the storm. Our work is showing that coastal marshes can reduce the flood risk costs of properties, which lie inland of the marshes by something in the range of 10-25%.

Tropical Defenses

So, that’s the effect of coastal marshes. But what about other biological defenses such as mangrove forests and offshore reefs (whether coral or oyster reefs)? Further research is planned in 2016 using RMS models to measure those likely benefits too.

But here’s a rather intriguing (if unscientific) thought: is there a curious Gaia-like principle of self-protection operating here in that the most effective natural coastal protections—mangroves and coral reefs—are themselves restricted to the tropics and subtropics, the very regions where tropical cyclone storm surges pose the greatest threat? Mangroves cannot withstand frosts and therefore in their natural habitat only extend as far north along the Florida peninsula as Cape Canaveral. And yet in our shortsightedness humans have removed those very natural features, which could help protect us.

Paradise Lost?

Between 1943 and 1970 half a million acres of Florida mangroves were cleared to make way for smooth beaches—those beautiful and inviting stretches of pristine sand which have for decades attracted developers to build beachfront properties. Yet, paradoxically, that photogenic “nakedness” of sand and sea may be one of the things, which leaves those properties most exposed to the elements.

With the backing of The Nature Conservancy it seems mangroves are making a comeback. In Miami-Dade County they’re examining a planting program to protect a large water treatment facility. Of course biological systems can only reduce part of the flood risk. They can weaken the destructive storm surge but the water still gets inland. To manage this might require designing buildings with water-resistant walls and floors, or could involve a hybrid of grey (manmade) and green defenses. And if we can reduce the destructive wave action, that might allow us to build earth embankments protected with turf in place of expensive and ugly, but wave-resistant, concrete flood walls.

On March 28, 2015 The Nature Conservancy organized a conference and press briefing in Miami at which they announced their collaboration with RMS to measure the benefits of natural coastal defenses. The coastline of Miami-Dade, already experiencing the effects of rising high tide sea levels, presents real opportunities to test out ways of combatting hurricane hazards and stronger storms through biological systems. Our continued work with The Nature Conservancy is intended to develop metrics that are widely trusted and can eventually be adopted for setting flood insurance prices in the National Flood Insurance Program.

Cracking the Cargo Conundrum

The smoke from nearby forest fires drifting across the entrance to the Port of Singapore wasn’t unduly worrying the captain of Titan, arriving from Shanghai with 10,000 containers on board. He had clocked the oil tanker off his starboard side and was content that, after obviously having a few navigational hiccups, the pilot of that vessel was now holding a course and speed safely out of Titan’s way. It was as he relaxed back in his chair and looked out across the bow that the smoke thinned out and he saw it. Another tanker. Huge. Q­max class carrying liquefied natural gas.

This is not the plot of a blockbuster book or the climactic scene of a Hollywood disaster movie. It is one of a number of plausible scenarios in the new RMS report on the challenges facing insurers because of the huge growth in marine cargo.

The report “Marine Cargo Catastrophe Modeling: Navigating the Challenges, Charting the Opportunities” examines the outdated techniques and incomplete data that marine insurers have had to make do with in order to estimate their cargo cat risk and port accumulations. Put simply, for too long knowing how much exposure they’ve built up in enormous international ports has been a guessing game. And two recent CAT events, which caused multibillion dollar losses because of huge concentrations of cargo, have exposed this weakness to an uncomfortable scrutiny.

The risks of global trade

Whereas the risks for land or property are essentially static, cargos are constantly moving and so the risk variables might seem unfathomably complicated. It’s not just the number of ports the vessel will go through and the CAT­ risks in those locations: hurricanes, storm surges, earthquakes, and terrorist attacks. Consideration needs to be given to the geology in that region, the construction of the ports in that country, and the level of disaster­ preparedness that exists.

As we saw during Superstorm Sandy, loss outcomes can be influenced by factors such as the exact location of cargo storage (In containers? In warehouses? Stacked?). Equally important is the vulnerability of the products. Are they fragile like electronics (ruined by water) or more resilient like jewelry (which can more easily be salvaged)?

The new RMS report in combination with the soon-to-be launched RMS Marine Cargo Model will bring clarity to these issues.

A purpose-built model for the industry

The RMS Marine Cargo and Specie model will be generally available this May, with the launch of RiskLink version 16.

To develop the model, the RMS geospatial team analyzed thousands of square kilometers of satellite imagery of top global ports and created a proprietary technique for allocating risk exposure across port terminals and storage structures. The port Industry Exposure Databases (IEDs) included in the RMS Marine Cargo Model, also incorporate important information on “dwell time,” or how long cargo spends at a given location. This variable, which is critical in determining port accumulations, can be highly influenced by variables such as weather, port automation, import/export ratios, and labor relations.

Covering almost 80 countries and three perils (wind, storm surge, and earthquake), the new marine model will provide 11 high-resolution and 150 medium resolution port industry exposure database, enabling the best insight on cargo vulnerability and global port accumulation currently available to the industry.

Cultivating Resilience Through Catastrophe Modeling

Through our partnership with the Rockefeller Foundation’s 100 Resilient Cities initiative, RMS is tasked with helping cities around the world become more resilient to the physical, social, and economic challenges that are a growing part of the 21st century. Our recent engagement with the city of Berkeley, California highlighted how modeling can be used to help a city acutely understand its risk and create policy that accurately protects against it, thereby helping to save lives of vulnerable populations.

RMS completed a dual-view seismic analysis for the city of Berkeley. The first was a city-wide analysis showcasing the vulnerability of all neighborhoods across Berkeley under various magnitude scenarios. RMS then completed a building-level study on the city’s critical infrastructure of care and shelter sites. These structures are the city’s emergency shelters and are intended to house all displaced residents after an earthquake. Our analysis concluded that these shelters are located in areas susceptible to higher than average damage, indicating that these facilities would be critical to surrounding neighborhoods following an earthquake. Furthermore, we found that in their current construction state, these buildings performed worse than average in all seismic scenarios modeled and that retrofitting these buildings was an economical way to improve building performance.

This RMS analysis proved to be a key recommendation that Berkeley’s Chief Resiliency Officer took to the city council for a bond measure to fund retrofits for their care and shelter sites. If Berkeley secures the funding for these retrofits, our analysis will have provided leverage for a policy directive that will result in increased protection for particularly vulnerable segments of the population exposed to seismic risk.

RMS was able to showcase the seismic risk of all neighborhoods throughout the city, contextualize the geographic vulnerability of shelter sites, and propose measures for helping to ensure that these critical pieces of infrastructure help to protect the populations that they serve. This project highlights that catastrophe modeling can be a key determinant in helping governments, NGOs, and the private sector understand their risk and increase resilience.