Category Archives: Risk Modeling

Join Us for Must-See Keynotes and Up Close Sessions at Exceedance 2018

With Exceedance 2018 coming May 14 – 17, we have lined up an interesting group of keynote speakers who will be onstage to provide their insights, ideas and inspiration. This year’s topics include:

Day 1: Earth, Wind and Fire

Our day one general session will focus on how we have leveraged lessons learned to bring new advances in model science and technology that enable (re)insurers to better manage and capitalize on catastrophe risk:

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Earthquakes in Oklahoma: An Update on Induced Seismicity Hazard and Risk for 2018

During 2017, Oklahoma and southern Kansas experienced Mw 3+ earthquakes more frequently than in California. Although the annual count of earthquakes in the Oklahoma/Kansas area has declined since peaking in 2015, the rate of earthquake occurrence is still extremely high. More than 50 events (Mw 3+) have occurred since the start of 2018, including events of Mw 4.6 and Mw 4.5 during the first weeks of April, with shaking strong enough to be felt in Oklahoma City.

In Oklahoma and other parts of the Central and Eastern United States, research studies have linked the increased occurrence of earthquakes to oilfield wastewater injection. Damage has mostly been minimal, but the ground shaking occurring from events greater than or equal to Mw5 could have produced extensive damage had comparable events occurred in more greatly populated areas of the state.

In 2016, the United States Geological Survey (USGS) released their first short-term forecast for seismic hazard — this was meant to capture the increased (but potentially transient) nature of this hazard, and the forecast emphasized that the seismic hazard in Oklahoma is comparable to that of California. Since the first one-year forecast in 2016, the USGS has released subsequent forecasts for 2017 and now for 2018.

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Towards a Resilient Insurance Market

This blog was originally published on InsurTech Gateway by Hambro Perks, click here for the original blog.

 

It is a fascinating time to work in the risk analytics business.

Traditional risks are changing, with much of this change being driven by technology. From the challenges posed by autonomous vehicles to the rapid digitization of the “smart home”, with automatic detection of threats such as fire and theft, systems are getting smarter and risks are changing.

Other types of traditional risk however still offer tremendous opportunities — last year’s storms in the U.S. have shown that even in one of the world’s most established insurance markets, uninsured losses are still a major problem. Barely half of the losses from Harvey, Irma and Maria were insured — the rest lies with the uninsured victims of the disaster, or if they are lucky, with the federal government who will help them rebuild.

This “protection gap” between those who have adequate insurance and those who do not, represents both a huge societal challenge, and a massive opportunity for the insurance market.

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Enter the Centre

On July 8 last year, the U.K. Prime Minister, Theresa May, announced her intention to establish the Centre for Global Disaster Protection.

The big idea: capitalize on the City of London’s expertise in financial services in order to help the governments of developing countries become more resilient to natural disasters, using risk transfer, where appropriate, to avoid humanitarian crises and augment disaster aid.

Later that month, Lord Bates, the U.K. Government Minister of State for International Development, shared more color on the Centre’s remit. Addressing the International Insurance Society, he explained:

“It is about investing in the data, research and cutting-edge science to analyze risk and design systems that work well for the poorest people. It is about providing training and sophisticated analytics.

It is about pre-disaster planning, including bringing vulnerable people into the dialogue on how support should flow in an emergency.

It is about providing neutral advice — supporting countries in making decisions about which financial instruments are right for them.

It is about innovation — looking at new ways of working and building new collaborations across the finance and humanitarian communities, to design financial instruments that work for developing countries.”

Lord Bates’ address also highlighted the analytical role RMS played in the U.K. Government’s decision to create the Centre.

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New Opportunities for Investors Willing to Embrace the “Resilience Gap”

This is a reprint of a “Trading Room” interview from Trading Risk magazine, please click here to visit the magazine website.

 

Opportunities abound for investors willing to embrace the resilience gap, according to RMS global managing director Daniel Stander

How does the Protection Gap offer opportunities for investors?

I’m afraid you’ve pushed one of my buttons with your very first question! I’ve been trying (unsuccessfully it seems) to move the debate away from the “protection gap”. I much prefer to talk about the “resilience gap”. This isn’t me being a pedant. The language we use here is important. Framing the problem in terms of “protection” grounds the debate in risk-transfer solutions.

But we all know that risk capital alone cannot address the fact that communities all over the world are frequently brought to their knees by the impacts of extreme events. Risk financing is no silver bullet. Those at risk — from the individual homeowner to the elected official governing a sovereign state — need much more than just contingent capital to materially increase their resilience to acute shocks. They need to develop a deeper understanding of the risks they face — and how it compares to their desired ability to withstand extremes.

More than that, they need to understand what interventions offer an acceptable ROI — from enforcing building codes to preserving nature-based defenses. And then of course they need to be prepared to respond effectively when the ground shakes or the wind blows, lest the economic impacts escalate. Opportunities abound for investors – but they will only be seized by those who can embrace the totality of the “resilience gap” and position their risk capital in the totality of the need.

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Do We Need a “Category 6” for Tropical Cyclones?

Climate modeling studies generally agree that anthropogenic climate change will likely cause tropical cyclones globally to be more intense on average, and that the most powerful ones will become more frequent. In response, climatologist Michael Mann (particularly well known for his so-called “hockey-stick” temperature graph) recently advocated the introduction of a sixth category to the Saffir-Simpson Hurricane Wind Scale (SSHWS), in order to better describe the very strongest storms. According to Mann, sturdier construction practices mean that Category 5 storms no longer all cause near-total destruction of human infrastructure and introducing a Category 6 would increase public awareness of the effects climate change is having on tropical cyclone strength. Mann is not the first to propose introducing a Category 6; after powerful tropical cyclones make landfall this is frequently deliberated.  Before wading into this debate however, let us look at the SSHWS itself.

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Terrorism Insurance Market: A Mature Approach to Growth

We were delighted to welcome so many representatives of the insurance industry to the RMS Terrorism Risk seminar in New York last month. Our seminar gave us a chance to update (re)insurance risk management professionals on the latest trends in global terrorism threat, its relevance to the insurance industry, and to share some of the latest developments and approaches for managing terrorism risk. Our keynote speakers included Bruce Hoffman from Georgetown University; Jack Riley, Vice President of the National Security Research Division at RAND Corporation, and Steven Simon from Amherst College.

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California Earthquake: Big Risk, Big Exposure

Unlike most U.S. property and casualty insurance, whose take-up rates range from ten percent (California residential earthquake) to greater than 90 percent (for fire insurance), workers’ compensation insurance is required by law. In California, nearly all of the 18.5 million employees across the state are covered by workers’ compensation, whether through an employer’s policy or self-insurance. This enormous exposure generates more than US$18 billion in premium annually, and because California is an “exclusive remedy” state, injuries arising out of and in the course of employment resulting from an earthquake are not excludedBut how can the cost of this obligatory, high risk exposure be measured?

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Get Ready – Exceedance 2018 Is Coming to Miami

Welcome to the first in a series of informative blogs leading up to Exceedance 2018, May 14 – 17.

Preparations are well under way for this year’s event, which will be held at the InterContinental Miami — set on the Biscayne Bay waterfront in the heart of downtown’s thriving financial and business district.

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Tornadoes in Europe

On March 12, 2018, an EF2 tornado struck the Italian city of Caserta, located about 30 kilometers (18 miles) north of Naples. The tornado caused damage to cars, buildings, and road infrastructure, with 15 people reported injured.

Figure 1: A tornado hits Caserta, Italy, March 12, 2018. Image source: www.meteoservice.net

This was a classical supercellular tornado. This type of tornado forms in a specific type of supercellular thunderstorm, which has the peculiarity of having a vortex of rising air inside — called a mesocyclone, and this is where tornadogenesis starts. Rainfall in the thunderstorm produces a downdraft, called rear-flank downdraft (RFD) in this case, which enters the mesocyclone from the back. The combined updraft (from the mesocyclone) and downdraft (from the RFD) create a tornado.

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