RMS Releases Comprehensive Europe Windstorm Model for Underwriting and Portfolio Risk Management

Model Reflects a Pioneering Combination of Numerical and Parametric Windfield Modeling
 

Newark, Calif. – May 30, 2006 – Risk Management Solutions (RMS), the world’s leading provider of products and services for the management of natural hazard risk, today announced the launch of a fundamentally new platform for quantifying wind-related risk in 12 European countries. Meteorological modeling has been extended to include a comprehensive suite of wind events enabling loss calculations both from large-scale Extra-Tropical winter-storms, such as windstorms Anatol, Lothar and Martin in 1999, as well as from smaller-scale summer thunderstorm events, such as the Birmingham Tornado in 2005. The model has also been extended to include Norway, Austria and Switzerland, allowing seamless modeling from Ireland in the west across Scandinavia to Germany and Switzerland in the southeast.

A pioneering combination of numerical and parametric modeling is used to capture the intrictate windfield structures typical of European windstorms. This modeling methodology also served to develop a full set of possible windstorm events with realistic tracks, frequency and severity distributions over a long-term simulation, essential for a fully probabilistic assessment of windstorm risk. RMS has been evaluating the use of numerical modeling technology and its applicability to catastrophe modeling for several years, explains Dr. Steve Jewson, head of the RMS Climate Hazards modeling team: “Numerical modeling is a highly powerful tool to help reconstruct past meteorological events at high-resolution and understand the development and life-cycles of these complex events, while statistical modeling is still the best way to generate large event sets beyond the historical record, as witnessed by the fallibility of weather forecasts, reliant on numerical weather prediction technology. RMS’ unique blend of both approaches offers a comprehensive solution to the challenges of using this valuable technology.”

Recognizing that U.S. and Caribbean hurricane landfalls are expected to be above the long-term mean for the next five years due to increased hurricane activity in the Atlantic basin, RMS also analyzed the historical record and meteorological data archives of European windstorm events. In contrast to the current situation with hurricanes, research has shown that there is no concrete evidence for a strong or consistent change in windstorm activity in Europe in recent years, or any regional climatic connections with activity rates. However, RMS experts have explicitly established a connection between RMS windstorm simulations and a related measure of the regional climatological state to continue monitoring the relationship between climate and windstorm activity.

The new model includes high-resolution hazard calculations, employing RMS’ Variable Resolution Grid technology, as well as updated modules for the classification and wind-resistance of properties, and total financial exposure. An additional loss-amplification module, consistent with that currently being applied to other third-generation RMS models, is included to consider factors such as economic demand surge, claims adjustment and inflation, the economic impact of reconstruction, and cascading catastrophes that can occur in major metropolitan areas.

“We have redesigned every underlying component of the model to incorporate leading-edge statistical and numerical modeling techniques, and provide underwriters with fine-scale risk differentiation to feed into their pricing decisions,” stated Jörg Müller, vice president of the RMS Central Europe practice. “By upgrading all the components of the model to demonstrably high standards rather than focusing on one aspect, RMS provides a balanced view and approach to risk management.”

The upgraded modeling platform is appropriate for a wide variety of insurance applications, including high-resolution underwriting decision-making, capital allocation, portfolio management, reinsurance pricing and alternative risk transfer decisions. The new model demonstrates RMS’ commitment to providing holistic modeling solutions for Europe, and comes ahead of several other major releases including Germany Flood in summer 2006 and the development of a Central Europe earthquake model.

The RMS® Europe Windstorm model was launched with version 6.0 of its RiskLink® and RiskBrowser® risk management platforms. Version 6.0 includes updates to the U.S. and Caribbean Hurricane models, Eastern U.S. and Eastern Canada Earthquake models, and the Europe Windstorm model. The new models were introduced on May 9-12 at the 2006 RMS Client Conference in Colorado Springs, Colorado. The largest gathering of catastrophe risk modeling professionals in the industry, the conference was attended by more than 500 insurance and reinsurance industry representatives.