Tag Archives: catastrophe modeling

The Lessons From “Last Year’s” Catastrophes

Catastrophe modeling remains work in progress. With each upgrade we aim to build a better model, employing expanded data sets for hazard calibration, longer simulation runs, more detailed exposure data, and higher resolution digital terrain models (DTMs).

Yet the principal way that the catastrophe model “learns” still comes from the experience of actual disasters. What elements, or impacts, were previously not fully appreciated? What loss pattern is new? How do actual claims relate to the severity of the hazard, or change with time through shifts in the claiming process?

After a particularly catastrophic season we give presentations around ”the lessons from last year’s catastrophes.” We should make it a practice, a few years later, to recount how those lessons became implemented in the models.

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Geocoding: The Underappreciated Science of Catastrophe Modeling

“Geocoding”’ is the ability to assign descriptive address information to portfolio locations for the purposes of assessing hazard at a given location. It is a core step that takes place within the catastrophe modeling process, ranging from a single location assessment to bulk look-ups for an entire portfolio.

Despite advances in peril mapping and geocoding technology, the geocoding process often remains a challenge. Here we consider these challenges and how the quality of the data can be improved.

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Irma’s Landfall in Florida Could Have Been Worse

19:00 UTC  Monday, September 11

Tom Sabbatelli, hurricane risk expert – RMS

Irma is a hurricane no more: following a Category 3 strength second Florida landfall near Marco Island, south of Naples, the storm’s intensity rapidly faded as it traveled to the north and west overnight. Irma now only maintains tropical storm strength as it crosses northern Florida. Expect to see further commentary on the storm’s rapid decay from my colleagues in the RMS HWind team later today.

Irma’s landfall and overnight track has allowed RMS to narrow yesterday’s stochastic event selection. A landfall eliminates offshore track scenarios that produce lower levels of onshore wind but higher levels of storm surge hazard along Florida’s west coast. Irma’s passage to the east of Tampa reduces the risk of significant storm surge levels and loss near Tampa Bay.

Initial damage reports indicate that damage may not be as severe as once feared, despite sizable roof damage in Naples and the Florida Keys.

As per the RMS Event Response process, our attention shifts from the regular, reactive stochastic event selections to a comprehensive interrogation of all causes of loss, both modeled and unmodeled. During Hurricane Harvey, my colleague Michael Young explained that one of the biggest challenges we face is collecting enough wind observations to create a complete picture of a storm’s wind field. Although our RMS HWind team have been collecting and processing data every three hours, we face these challenges with Irma as well. More data will become available in the coming days, which will enhance the accuracy of our wind field and surge modeling.

As part of our event response service, we have the following activities underway:

  • Reconnaissance will help us narrow the uncertainty around what could be a potentially significant contribution to loss from storm surge and flooding. These efforts do not need to wait for boots to hit the ground, though; we have teams already scouring high-resolution satellite images to detail the exact extent of the flood waters and the underlying exposure at risk.
  • Our RMS Field Recon team, fresh off their trips to Texas following Hurricane Harvey, are reactivating their reconnaissance plans. In the days ahead, their visits to cities across Florida will help reveal the depth of the flood waters and the extent of wind damage observed throughout the state.

You may have already seen that our colleague, Victor Roldan, has been documenting his experience riding out the storm from his home in Miami. Victor has reported that basements are flooded along Brickell Avenue, and area that was hard hit in Wilma, but wind damage is minimal.

Following a hurricane, power outages predominantly contribute to heightened business interruption and post-event loss amplification, which is possible in an event of this magnitude. As many as seven million customers in Florida may have been without power at one time, almost triple the peak outage observed during Hurricane Matthew.

Caribbean Impacts

Let’s not forget about the Caribbean islands left in Irma’s wake, still cleaning up and attempting to restore power and telecommunications several days after the storm’s initial impact. For instance, as many as one-quarter of customers in Puerto Rico remain without power four days after Irma’s passage. This prolonged restoration may prove to be a figure that could compound insured losses across the island. During their comprehensive review of the event’s lifecycle, RMS modelers will refine projections of the insured loss across all Caribbean islands, which is assumed will contribute materially to the total industry loss.

As the Event Response team now transitions from producing real-time event updates, they have many existing key data sources from which they can draw these critical observations. Ultimately, these insights will inform our official insured industry loss estimate, targeted for publication in approximately two weeks’ time.

Set to Impact Entire West Coast of Florida, Irma Raises Significant Storm Surge Concerns

14:30 UTC  Sunday, September 10

Tom Sabbatelli, hurricane risk expert – RMS

As Hurricane Irma makes landfall in the Florida Keys as a Category 4 storm, the range of the storm’s possible future tracks in the latest RMS HWind forecast product is rapidly narrowing. It is now certain that Irma will track along Florida’s west coast and impact all major population centers from Naples to Tallahassee.

What is less certain is the length of time Irma’s center will remain over water, with some scenarios projecting a landfall near Fort Myers and others delaying the landfall until Irma reaches the state’s Big Bend region.

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Has That Oilfield Caused My Earthquake?

“Some six months have passed since the magnitude (Mw) 6.7 earthquake struck Los Angeles County, with an epicenter close to the coast in Long Beach. Total economic loss estimates are more than $30 billion.  Among the affected homeowners, the earthquake insurance take-up rates were pitifully low – around 14 percent. And even then, the punitive deductibles contained in their policies means that homeowners may only recover 20 percent of their repair bills.  So, there is a lot of uninsured loss looking for compensation. Now there are billboards with pictures of smiling lawyers inviting disgruntled homeowners to become part of class action lawsuits, directed at several oilfield operators located close to the fault. For there is enough of an argument to suggest that this earthquake was triggered by human activities.”   

This is not a wild hypothesis with little chance of establishing liability, or the lawyers would not be investing in the opportunity. There are currently three thousand active oil wells in Los Angeles County. There is even an oil derrick in the grounds of Beverly Hills High School. Los Angeles County is second only to its northerly neighbor Kern County in terms of current levels of oil production in California.  In 2013, the U.S. Geological Survey (USGS) estimated there were 900 million barrels of oil still to be extracted from the coastal Wilmington Field which extends for around six miles (10 km) around Long Beach, from Carson to the Belmont Shore.

Beverly Hills High School Picture Credit: Sarah Craig for Faces of Fracking / FLICKR

Beverly Hills High School   Picture Credit: Sarah Craig for Faces of Fracking / FLICKR

However, the Los Angeles oil boom was back in the 1920s when most of the large fields were first discovered. Two seismologists at the USGS have now searched back through the records of earthquakes and oil field production – and arrived at a startling conclusion. Many of the earthquakes during this period appear to have been triggered by neighboring oil field production.

The Mw4.9 earthquake of June 22, 1920 had a shallow source that caused significant damage in a small area just a mile to the west of Inglewood. Local exploration wells releasing oil and gas pressures had been drilled at this location in the months before the earthquake.

A Mw4.3 earthquake in July 1929 at Whittier, some four miles (6 km) southwest of downtown Los Angeles, had a source close to the Santa Fe Springs oil field; one of the top producers through the 1920s, a field which had been drilled deeper and had a production boom in the months leading up to the earthquake.

A Mw5 earthquake occurred close to Santa Monica on August 31, 1930, in the vicinity of the Playa del Rey oilfield at Venice, California, a field first identified in December 1929 with production ramping up to four million barrels over the second half of 1930.

The epicenter of the Mw6.4 1933 Long Beach earthquake, on the Newport-Inglewood Fault was in the footprint of the Huntingdon Beach oilfield at the southern end of this 47 mile-long (75 km) fault.

As for a mechanism – the Groningen gas field in the Netherlands, shows how earthquakes can be triggered simply by the extraction of oil and gas, as reductions in load and compaction cause faults to break.

More Deep Waste Water Disposal Wells in California than Oklahoma

Today many of the Los Angeles oilfields are being managed through secondary recovery – pumping water into the reservoir to flush out the oil. In which case, we have an additional potential mechanism to generate earthquakes – raising deep fluid pressures – as currently experienced in Oklahoma. And Oklahoma is not even the number one U.S. state for deep waste water disposal. Between 2010 and 2013 there were 9,900 active deep waste water disposal wells in California relative to 8,600 in Oklahoma. And the California wells tend to be deeper.

More than 75 percent of the state’s oil production and more than 80 percent of all injection wells are in Kern County, central California, which happens to be close to the largest earthquake in the region over the past century on the White Wolf Fault: Mw7.3 in 1952. In 2005, there was an abrupt increase in the rates of waste water injection close to the White Wolf Fault, which was followed by an unprecedented swarm of four earthquakes over Magnitude 4 on the same day in September 2005. The injection and the seismicity have been linked in a research paper by Caltech and University of Southern California seismologists published in 2016. One neighboring well, delivering 57,000 cubic meters of waste water each month, was started just five months before the earthquake swarm broke out. The seismologists found a smoking gun, a pattern of smaller shocks migrating from the site of the well to the location of the earthquake cluster.

To summarize – we know that raising fluid pressures at depth can cause earthquakes, as is the case in Oklahoma, and also in Kern County, CA. We know there is circumstantial evidence for a connection between specific damaging earthquakes and oil extraction in southern California in the 1920s and 1930s. According to the location of the next major earthquake in southern or central California, there is a reasonable probability there will be an actively managed oilfield or waste water well in the vicinity.

Whoever is holding the liability cover for that operator may need some deep pockets.

“Computers Do the Calculating to Allow People to Transform the World.”

The quote above is from Conrad Wolfram, the renowned British mathematician, well known as an advocate for the advancement of mathematics teaching.  He argues that teaching students how to calculate using computers is more effective and more liberating than teaching calculation by hand. In his talk at TEDGlobal 2010, he describes his four-step process to solve a math problem:

  1. Pose the right question
  2. Formulize the question
  3. Computation
  4. Verifying that the computation answered the question

Currently, Wolfram believes 80 percent of math education focuses on step three – computation – and teaching people how to compute by hand.  Instead, he proposes “…we ought to use computers to do step three, so students can spend much more effort on learning how to do steps one, two and four – conceptualizing problems, applying them.”

The proper development and utilization of modern computer systems, including hardware and software advances, should enable Wolfram’s vision to come true, with users moving their allocated time away from calculations and process – stage three issues – and moving it to conceptualizing problems and applying the solutions effectively. And through my recent hands-on experience, I am confident that Risk Modeler, powered by RMS(one)®, will truly allow risk analysts to modify that time allocation.  I shared my experience of Risk Modeler on the keynote stage at Exceedance, and I invite you to watch the video below.

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In 1999, a Legend Was Born

Many of you reading this may not realize it, but RiskLink® celebrates its 18th birthday this September.  RiskLink was born in 1999, and for some of you, RiskLink started its cat modeling career before you did.  I can remember using RiskLink back then, and it is a testament to the quality of that product that it is still the predominant catastrophe modeling software.  I’ve grown up with it, many of us have, and with that kind of longevity and familiarity, it is no wonder that few people even consider or question what can be an elongated process involved in completing an analysis, using this bedrock of catastrophe management.

That process to access your analysis is a lot of work. File management, model profile management, financial perspective re-maps, system restrictions. Wolfram’s assumption looks reasonable, that up to 80 percent of your natural catastrophe modeling time is spent in this process.

We’ll celebrate 18 successful years of RiskLink, but the market is shifting to an embrace of big data analytics.  This creates great timing for Risk Modeler. Risk Modeler is built specifically to work with large amounts of data to remove the procedural, tactical component of your work and move it to an efficient and speedy system.

How Would You Use Your Process Time?

This reallocation of process allows you to spend more time using your experience and intuition to conceptualize, understand and guide your business more effectively.  You can start to ask and answer questions that anticipate the business’ needs.  You can spend more time proactively working on change management with your key stakeholders. You can work more directly with the underwriting teams to understand and differentiate risks more thoroughly.

Risk Modeler is an efficient interface between your insight and experience and the analytical power of cloud-based computing. It allows you to simply ask a question, and it delivers the answer.   Mr. Wolfram reminds us that, “…math is not equal to calculating. Math is a much broader subject than calculating…I think of calculating, in a sense, as the machinery of math. It’s the chore. It’s the thing you’d like to avoid if you can, like to get a machine to do.”

Modeling is more than process, which is the chore of risk modeling.  I am excited that Risk Modeler is that system capable of completing that chore for you. You can now unleash your energy, creativity, insight, and experience on improving your company, your industry and to help make the world more resilient.

For more information on RMS(one), a big data and analytics platform built from the ground-up for the insurance industry, and solutions such as Risk Modeler and Exposure Manager, please click here.

Day Four at Exceedance 2017

Thursday in New Orleans, and there was still much to see and learn on the final morning of Exceedance.

Attendees were taking advantage of all there was to offer in The Lab, including connecting with RMS experts for product demonstrations and training for the latest Version 17 and Risk Modeler developments.

23 Mar 2017 EXCD Emily P smaller

As mentioned in yesterday’s blog, attendance has been exceptional at Exceedance, and some track sessions have been so popular that Thursday’s agenda was updated to repeat the High Definition Modeling capabilities, Version 17 RMS® North America Earthquake and RMS® North Atlantic Hurricane Model Changes, RMS(one)® solutions, RMS roadmap and future solutions, and U.S. Flood Market tracks.

A Personal Message from Hemant

The RMS Exceedance Party (EP) Was the Place to Be!

Those who attended the EP Wednesday night at Generations Hall were treated to quite a party! Along with three separate spaces – each with its own New Orleans theme – many grooved to the music of Rockin’ Dopsie, Jr. and the Zydeco Twisters.

23 Mar 2017 EXCD EP party singer small

 

 

 

 

 

 

 

 

 

 

 

 

 

Mr. Dopsie (or perhaps it’s “Mr. Rockin’”) had the dance floor alive with revelers moving to the beat of local zydeco as well as hits from the past. The night was capped off with Café Du Monde serving their world-famous beignets.

A Final Note on Exceedance 2017

As Exceedance 2017 comes to a successful conclusion, all of us here at RMS want to thank those who came from around the globe to be in attendance.

This was truly “your” conference, and we hope you found value in listening to our keynote speakers on the big stage, as well as learning more about our exciting updates and new solutions that will enable you to own your view of risk, provide the flexibility you need to make decisions, operate more cost-effectively, and create resilience.

As we move beyond this year’s Exceedance, RMS is ready to meet its commitments as we remain on track for a full schedule of delivery throughout 2017!

Day Three at Exceedance 2017

It’s Wednesday, which meant another full day of sessions, presentations, The Lab, a networking event, and more, happening here in New Orleans.

22 Mar 2017 - The Lab EXCD small

Attendance has been exceptional at Exceedance, and some track sessions have been so popular that we are repeating a few of them. For those of you here in New Orleans, the sessions will repeat on Thursday morning, starting at 10 a.m. Be sure to check the Exceedance app for details.

The main theme of the morning’s general session was a demonstration of how RMS is working to help clients explore and manage new and emerging perils, as well as applying RMS model expertise to long-standing lines. Speakers included Mike Steel, Christos Mitas, Robert Reville, Steve Jewson, and Andrew Coburn.

Wednesday Highlights

A few of the highlights of the day’s sessions included:

  • Christos Mitas took us deep into what he described as the unique and exceptional world of cyber terror and cyber risk modeling, with insights that included the upcoming (April 2017) launch of the RMS Cyber Accumulation Management System CAMS v. 2.0.
  • Robert Reville from Praedicat explored product stewardship and product liability risk, explaining the causes of liability accumulation, how the risk of major technological innovation is not known, and how risk accumulation can go on for years.
  • Steve Jewson transported us to India and China, presenting new agricultural risk models – including drought models for four countries. Agricultural risk is one of the top concerns for our clients in Asia-Pacific and Latin America, offering the market exciting growth opportunities.
  • Andrew Coburn from RMS and Dr. Hjörtur Thráinsson from Munich Re combined to present the RMS strategy of a single data standard for all lines and classes of insured exposure, as well as opportunities to generate exposure analytics for more business lines, a single client, or a single location.

Our Second Theme – Resilience – Personified.

The afternoon general session focused on resilience, and the exceptional work happening here in New Orleans over the past several years. Paul Wilson began by acknowledging the accomplishments of Build Change, a partner organization to RMS that continues to build resilience in emerging nations.

He then walked the crowd through a brief history of New Orleans – a city that has been built, and rebuilt, on its experience with hurricanes – before introducing keynote speakers Tanya Harris-Glasow of the Make It Right Foundation, and Jeff Herbert, chief resilience officer for New Orleans. The success of the city following Hurricane Katrina stems from the efforts of innovators like them, and their stories of strength, perseverance, teamwork, and inspiration, truly personify the theme of resilience.

The session continued with Dr. Robert Muir-Wood’s discussion on risk modeling and resilience in Louisiana, and concluded with remarks from RMS President Mike Pritula, who spoke on a variety of topics including his commitment to concentrate on RMS clients, and the challenge of embracing the inevitable change that technology is bringing to the catastrophe modeling community.

The Lab is the Hot Spot in New Orleans!

Customer feedback about The Lab continues to be extremely positive – with a lot of great conversations, product demos, and training sessions focusing on the latest developments from Version 17 and Risk Modeler to help customers choose the best routes for adopting new solutions for 2017 and beyond.

Get Your Mojo Rising on at the EP Tonight!

Last night’s well-attended masquerade in The Lab is now a happy memory. And far as we can tell, everyone removed their masks in time for the first general session this morning.

22 Mar 2017 - Masked Ball Small

But if you’re here at Exceedance, our legendary “EP” is coming up tonight – offering three tastes of New Orleans in one unique location – Generations Hall, built in the 1820’s and originally a sugar refinery.

With three themes, Jazz Night Club, Mardi Gras, and Louisiana Cajun, be ready to put on your dancing shoes and show us your voodoo.

Thursday is our final day in New Orleans, so please check back tomorrow for highlights and a message from Hemant!

Day Two from Exceedance 2017

Tuesday dawned bright and sunny in New Orleans as Exceedance got underway.

More than 900 attendees joined Hemant and eight keynote speakers during the Exceedance General Session. Attendees learned how RMS continues to deliver on its client commitments with the launches of significant capabilities ranging from Version 17, including the new Version 17 RMS® North America Earthquake Model, Version 17 RMS® North Atlantic Hurricane Model, and Risk Modeler powered by RMS(one)®.

In addition to Hemant, Larry Orecklin from Microsoft took to the stage along with Emily Patterson, Mark Powell, Chris Folkman, Emily Grover-Kopek, Josh Ellingson, Ryan Ogaard and Eric Yau.

Tuesday Highlights

“Exceedance is a key part of our continuing dialogue with clients around their needs and priorities, discussing how we can better align to help meet their business goals.”

Hemant Shah, co-founder and CEO of RMS

Hemant demonstrated the superiority of the Version 17 North America Earthquake (NAEQ) Model through a personal anecdote. As you’d expect, Hemant ran the data on his own house through the model and found that his risk is down 27 percent on an expected loss with risk load factor. #lowerhemantspremium

Eric Yau announced that Risk Modeler, powered by RMS(one), will be ready for general availability in April, and described our continued commitment to RiskLink® as a standalone product, as well as being an integral part of the RMS(one) platform.

Josh Ellingson described how Risk Modeler will empower analysts to spend more time understanding the drivers of risk and applying their creativity to expand their book business by collapsing the manual processing of their modeling workflow.

Build Change

The Lab is Where It’s At!

With The Lab in full swing, attendees took advantage of the opportunity to engage directly with RMS experts – getting up-close insights and training on the RMS(one) platform, Version 17 North Atlantic Hurricane Model and North America Earthquake Model, and much more. It’s truly where the action is!

The Mini Theater

Not to be outdone by The Lab, the Mini Theater on Tuesday played host to three insightful and engaging presentations focused on building resilience in an ever-changing world. Topics included Enhancing Urban Resilience: Managing Risk to Critical Infrastructure; Stories from the Field: Nepal Impact Trek with Build Change, and Road to Coastal Habitats in Managing Natural Hazards.

Monday RMS Welcome Reception a Hit

Last night’s RMS Welcome Reception was a hit – and not just because of the live jazz music. The well attended two-hour welcome event included plenty of mingling, great discussions, and delicious bites.

Put on Your Mask and Come to the Party!

For those of you in attendance at Exceedance, join us in The Lab from 6:00 to 8:00 p.m. to celebrate our special New Orleans-themed masquerade (no costumes required, but masks will be provided). It will be a fun evening where you can engage with RMS leaders, scientists, and strategists as they reveal the latest RMS solutions.

Check back tomorrow for more highlights from Exceedance 2017!

 

Day One from New Orleans – Exceedance Is Under Way!

New Orleans is known for its unique cuisine (crawfish, anyone??), cool music (the birthplace of jazz), Mardi Gras (party!!) – and for the better part of this week – Exceedance 2017.

Exceedance 2017

 

 

 

 

 

 

 

 

 

Yes, Exceedance is finally here, and we’re looking forward to an exciting line up of informative sessions, up-close training, engaging speakers, and networking opportunities. For those of you who can’t join us at Exceedance this year, look for highlights on Twitter and here on the blog, as we publish throughout the event.

Welcome Reception

Get set to mingle tonight at the RMS Welcome Reception, from 6:00 to 8:00 p.m. in Vitascope and the 8 Block Bar at the Hyatt Regency. It’s the perfect venue to enjoy savory hors d’oeuvres, catch up with friends, colleagues, and RMS staff members, and soak up some authentic jazz.

Ready, Set, Go!

RMS has listened and worked closely with our clients to innovate the type of solutions that support their strategic business needs.  In 2017, we’re delivering on these commitments with a significant set of capabilities ranging from Version 17 (including highlights such as the RMS® North Atlantic Earthquake model and the RMS® North America Hurricane Model), to Risk Modeler.

Over the course of the next three days you’ll be able to choose from 105 sessions across 23 different tracks, three General Sessions, The Lab and Mini Theater with up close training that only Exceedance can offer. Exceedance is where the latest modeling, analytics, and technology all come together!

Don’t forget, you can check on events, tailor your schedule, review session times, set up meetings – all with the Exceedance 2017 Mobile App. If you haven’t downloaded it, go to your app store and search for “Exceedance”.

We’ll keep you posted via this blog on each day’s highlights, so check back. And welcome to Exceedance!