ExposureIQ: Helping Portfolio Managers Navigate a Record-Breaking Hurricane Season

Last year delivered a record-breaking North Atlantic hurricane season in terms of the number of named storms, with a total of 30 during 2020. Your portfolio management teams working on the insurance frontline did not get much of a break after early July. They were busy providing answers to stakeholders as to how each of these storms affected their portfolios.

You know it had been a busy season when we worked our way through the 21 official tropical cyclone names and, like 2005, the naming system then defaulted to the Greek alphabet. Even though the official end of the hurricane season passed on November 30 last year, your portfolio management teams still continually monitor for activity in the North Atlantic Basin - just like the RMS® Event Response team

Pressure on Portfolio Managers

Portfolio managers have been under pressure to cope, and the speed and confidence in their analysis is always crucial when assessing the impact of an event on a portfolio. 2020 had not been an easy year. Looking at September last year, 10 storms formed – from Hurricane Nana to Tropical Storm Beta. In fact, on September 18, 2020 alone, Storms Wilfred, Alpha and Beta formed just hours apart. In each of these instances, all eyes are on portfolio management teams to work out total exposure and, how the portfolio will be impacted. The ability to work fast, ensure accuracy, and deliver clear assessments is vital. How can this be achieved?

As with many previous hurricane seasons, RMS Event Response provided timely insights before, during, and after events, from potential hurricane track and wind and surge field size analysis with our RMS HWind products through to stochastic event footprints and detailed damage assessments using the latest artificial intelligence and machine learning technology. Our clients really benefited from ExposureIQ™, an integrated application in our Risk Intelligence™ cloud-based platform, specifically designed for portfolio managers.

The ExposureIQ application offers a visual concentration of risk accumulations and their proximity to key hazard zones in any region in the world, for a deeper understanding of portfolio hot spots. With portfolio-level reporting using metrics such as total insured value and exposed limit, ExposureIQ leverages world-renowned science from RMS models, including High Definition Models™.

ExposureIQ users now also have an advantage because event response and HWind assets flow automatically into the ExposureIQ application, allowing portfolio managers to quickly assess the impact on their exposure. Exposures from our Risk Modeler™ application are also accessible in ExposureIQ for seamless collaboration between catastrophe modeling and exposure management teams.

With exposure and contracts accessible in ExposureIQ, any previous pressure to almost manually process vast amounts of data has been removed. Portfolio managers can now quickly view the exposure and the contracts that could be and ultimately were affected by an event. They can swiftly respond to event track changes, even seeing the potential impact of multiple storms simultaneously. The built-in RMS Financial Model leverages metrics to understand how close a contract is to its exposed limit.

Spotlight on Hurricane Zeta

Let’s look at Hurricane Zeta as an example of how the ExposureIQ application works. Zeta made landfall near the small village of Cocodrie, Louisiana on October 28, 2020, as a Category 2 SSHWS with sustained winds of 110 miles per hour (177 kph), according to the National Hurricane Center. RMS published loss estimates indicated that total onshore U.S. insured losses from Hurricane Zeta to be between US$3 and US$5 billion.

RMS HWind forecasting products, consistent with several previous events this season, had delivered effective forecasts for the track, peak gust probabilities, landfall location and timing more than 72 hours before landfall. With a client’s exposure and contracts associated with that exposure already loaded into ExposureIQ, as soon as HWind forecasts for a new event are available then data showing the probabilities for the track, peak gust, and surge elevation can be shown as map layers. Clusters of exposure within a specific insurance contract are shown by the blue circles.

The screenshot in Figure 1 shows the HWind forecast track probability for Hurricane Zeta on October 27, 2020, based on actual model forecast data initialized at 00:00 UTC that day, some 45 hours before Zeta made landfall near Cocodrie, 40 miles southwest of New Orleans. At this stage, HWind was indicating a high degree of certainty of landfall in this area. This information could prove vital in determining estimated potential losses, including whether Zeta would have a large impact on exposure and practical considerations on ensuring capital adequacy and on-the-ground resources. ExposureIQ could also show the potential overlap and impact from previous events that impacted the same area, such as Hurricanes Delta, Sally and Laura. Decision makers can also investigate different scenarios.

Having automatic access to HWind forecasts ahead of an event together with RMS Event Response footprints post-event and layered over your portfolio – all within one application – frees up valuable time and resources for portfolio managers. Instead of concentrating on data preparation and processing, portfolio managers can focus on analysis, insights, and advising the business on an event’s impact and the best plan of action moving forward.

Hopefully, portfolio managers can catch their breaths after this season – although in 2005, Tropical Storm Zeta did trip into January 2006. Before Storm Ana forms as the first in the 2021 season, we would be happy to share how our clients used ExposureIQ in 2020; please email sales@rms.com to find out more.