Rajesh Narayan CPCU CIOP LSSBB, helps insurance carriers establish cat modeling best practices in his role as Managed Services Business Leader for RMS.
His work over the past 18 years in the P&C insurance industry has centered around increasing the reach and availability of insurance globally through core operations transformation using data, analytics and process optimization. He can be reached on LinkedIn.
Join our upcoming webinar and learn about risk modeling best practices from RMS Analytical Services
Standard and Poors (S&P) has been providing ratings for insurance carriers since 2005 by examining their risk management practices. They view effective Enterprise Risk Management (ERM) as a supporting pillar of their rating analysis, as ERM reaches across all the core attributes of a business.
This includes a carrier’s treatment of catastrophic events, and their preparation for the “unexpected”, with S&P laying out a method for carriers to establish best practices in this area. And, according to their recent findings, they concluded that carriers with stronger ERM programs weathered the 2017 natural catastrophes better than those with weaker programs.
In its recent “Global Risks Report”, the World Economic Forum (WEF) provided a comprehensive analysis of the risks and threats that the world faces, from economic, environmental, to geopolitical. Now in its thirteenth report, each year it publishes tables of the top ten risks in terms of their likelihood of happening, and potential impact. Although “newer” risks such as cyberattacks and data fraud do feature in the top five in terms of likelihood, it is extreme weather events and natural disasters that are in the top two or three in each list. In fact, in the view of the WEF, only weapons of mass destruction are ahead of extreme weather and natural disasters in terms of their impact on the globe. Nat cat events have not always topped the table — maybe the scale of the events of 2017 have brought the impact of nat cats to the fore.
There is also a recognition from the WEF that the failure to adapt and mitigate to climate change is rising as a threat. The World Weather Attribution coalition of scientists stated that 19 trillion gallons of rainfall from Hurricane Harvey that hit the Houston area was three-times more likely to occur due to climate change, and 15 percent more intense.
In the first twenty days of August, the state of Kerala in southern India received rainfall that was 164 percent above the average. This rain built on very wet antecedent conditions, July had seen rainfall about 40 percent above average. As a result, to manage the flood waters, state authorities were forced to open 80 dams in the region, including the Idukki dam, one of the largest arch dams in Asia. Overall, this resulted in massive flooding, displacing millions of people while claiming the lives of more than 350 citizens, destroying trees and crops and severely disrupting tourism with the closure of Cochin International airport.