Callum Higgins is senior product analyst at RMS, and is based in London. He joined fellow employees from RMS and RMS clients on our annual Impact Trek in Nepal during March this year. This is Callum’s account of his time in Nepal.
On the first day of the Impact Trek, we were based at Build Change’s office in Kathmandu, hearing about the various projects the charity is working on in Nepal from Jessica Stanford (Housing Reconstruction Program Manager), as well as the technological innovations Build Change is using to increase the efficiency of their work from Adam McDonald (New Frontier Technology Architect). For day two, the Impact Trekkers were keen to get out of the office and into the city to examine some of the typical property construction in the region and the challenges that Build Change faces in making a greater proportion of these safe from earthquakes.
The funding that followed the devastating Mw 7.8 earthquake in April 2015 has allowed Build Change to have an impact during the reconstruction process. This is reflected through the design and construction of new earthquake resistant properties, retrofitting of damaged houses, and by training local people in earthquake resistant construction practices.
So far, this work has been focused primarily in rural areas where the earthquake damage was greatest, but as attention begins to shift from reconstruction to future earthquake resiliency, Build Change is also interested in the possibility of additionally employing retrofitting in more populated regions such as the Kathmandu Valley. However, convincing stakeholders such as homeowners to fund retrofitting for their undamaged homes in order to protect inhabitants against future earthquakes can be a difficult prospect.
Kathmandu is one of the fastest growing metropolitan areas in South Asia, driven by rapid urbanization. This has resulted in haphazard and uncontrolled growth of built-up areas, often with irregular and substandard housing vulnerable to earthquakes.
One area where this is particularly noticeable is Kirtipur, located five kilometers southwest of Kathmandu city center, and the destination for the day’s activities. One of the five municipalities in the Kathmandu Valley, this ancient city known for its Newari culture and many temples, dates back to 1099 A.D. However, its once rural surrounds have been replaced by urban development, while construction in the city itself has been substantial and is still ongoing. This was immediately clear upon arrival with piles of bricks and rebar lining the streets, ready for use in construction.
Adam, our host for the day, had previously visited Kirtipur to capture panoramic street level views through a transect of the city using a 360-degree camera and a smartphone. This imagery has been uploaded to Mapillary, a crowdsourced street level imagery platform. By tagging these photos with information such as a building’s construction type, the hope is that an inventory of property types in a community and their vulnerability to earthquakes could be created to assist in highlighting the benefits that retrofitting would bring. The aim of a further visit from the Impact Trekkers was to share our catastrophe modeling experience and identify data that might be useful to tag within these images, to help determine the relative vulnerability of different properties.
An extensive walking tour of the city revealed several trends. Construction tended to fall into one of two main categories: older masonry buildings of brick or stone construction and bonded by either mud or cement, and newer reinforced concrete frame buildings with masonry infill that dominate the properties under construction. Masonry buildings observed were typically two to three stories while reinforced concrete construction was typically three to five stories in nature.
Likely earthquake damage could be seen in places for some of the masonry buildings. These buildings could be prime candidates for retrofitting, given this design of building is similar to the building design that Build Change has performed retrofitting work for in other regions of Nepal. Not only improving earthquake safety, retrofitting such buildings also helps to avoid them being replaced by more modern construction, aiding communities in retaining their historic character.
Despite generally being newer and better constructed, reinforced concrete frame buildings in Nepal can also often be vulnerable to earthquakes, with most being non-engineered buildings and some having weak columns. Soft stories (floors with large openings where internal walls would normally be required for stability) are also a major risk for some of these buildings, with many occupied by open-plan ground floor shops.
As such, large numbers of the reinforced concrete structures observed could also significantly benefit from retrofitting. However, Adam explained that retrofitting work for some of the reinforced concrete frame buildings would require a more bespoke, time-consuming and expensive approach due to the complexities of reinforced concrete construction as compared to masonry.
The tour was rounded off by lunch in the local community restaurant Newa Lahana, clearly a popular haunt for students from the nearby Tribhuvan University. Providing a lively atmosphere, city views and Newari food aplenty, this provided the perfect opportunity to discuss the observations made during the morning before our return to the Build Change office.
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October 06, 2022
Hurricane Ian: The Challenge of Getting Insights into Your Business Faster
From our numerous client conversations, climate change as a business issue has risen high on the agenda, and this has certainly escalated over the last twelve months. There is a growing recognition of the need to quantify the impact that climate change will have on your business. But – where do you start with this? One of the major challenges is knowing what question to ask. With the inclusion of climate change scenarios within the General Insurance Stress Test (GIST 2019), which the larger U.K. insurers and Lloyd’s syndicates are required to respond to, the Bank of England Prudential Regulation Authority (PRA) is outlining one approach.
RMS is particularly well placed to support insurers in responding to the “Assumptions to Assess the Impact on an Insurer’s Liabilities” portion of the climate change section within GIST, which examines how changes in U.S. hurricane and U.K. weather risk under different climate change scenarios may affect losses.
Stochastic models are the perfect tools to evaluate such physical climate change risk to liabilities, with the ability to reflect changes to the hazard under different climate change views and providing a clear link between cause and effect. Our contribution to the landmark “Risky Business” report in 2014 looking at sea-level rise in the U.S. to 2100 is a key example of this. As such, RMS has developed internally adjusted views of its U.S. hurricane, U.S. flood, U.K. windstorm and U.K. flood models to reflect most of the assumptions and scenarios from the PRA, detailed in the table below:
The PRA is asking for the potential impact of these assumptions and scenarios on the Annual Average Loss (AAL) and 1-in-100 Aggregate Exceedance Probability (AEP) loss for all relevant U.S. and U.K. insurance contracts. Getting to a reasonable assessment of these numbers however is not a trivial exercise, requiring the appropriate adjustment of model data in up to 18 possible assumption scenario combinations, and then the analyses of the relevant exposure against these.
To help insurers start thinking about how to respond to the PRA request, RMS can provide broad industry-wide factors derived by running industry exposure over the adjusted models. This “Industry Factors Package” will be made available to RMS clients, while others who wish to access these will be able to license them separately. The industry-wide factors will allow for the approximation of losses under the assumptions and scenarios laid out in the table above, however there could be significant limitations to this approach for individual companies and portfolios. Your exposure, or risk profile, will not reflect that of the industry and therefore the application of industry-wide factors may not reasonably reflect your own risk. The uncertainty around this approach means you may decide this is not a satisfactory solution for your submission.
For a more detailed bespoke view, we are offering to run insurers’ own exposures through the adjusted models, via RMS Analytical Services, to better satisfy the PRA’s requirements. This “PRA-ready Package” provides unique results for submission to the PRA which reflect your book of business and allow for comparisons with those of the industry.
Even if you fall out of the larger U.K. insurers and Lloyd’s syndicates for whom this applies, you should take note. This might be the start of a new wave of analytical rigor around climate change, and more regulators are likely to follow. Beyond regulation, it is also becoming fundamental to understand the impact of climate change for business decisions. For example, to answer what is insurable in 2050 and whether you need to adjust your underwriting and portfolio management strategy accordingly.
RMS can assist in getting answers to such questions through a customized climate change consulting engagement as part of an “Enhanced Climate Change Package”, utilizing advanced climate change analytics to provide more detailed results based on the PRA or other similar scenarios. This package can include the PRA-ready results and basic PRA climate change submission information or be a separate engagement depending upon your needs.
RMS clients who are interested in these solutions should reach out to their Client Success Manager for details on how they can be accessed, while other insurers can email email@example.com. With the submission date of October 31 looming, and many with tighter internal deadlines, it is important not to delay! Indeed, we are already engaging with several clients on how we can help them.…
Callum is the product manager for RMS Event Response, including RMS HWind, and is based in London. Most recently he has been focused on improving client workflows through the integration of event response with the RMS Intelligent Risk Platform.
Previously, Callum has worked on climate change initiatives at RMS as well as updates to the India Agricultural Model and Australia Cyclone Model.
Callum is a Certified Catastrophe Risk Analyst and holds an integrated master’s degree (MEarthSci) in Earth Sciences from Oxford University.