Newark, Calif.-based Risk Management Solutions (RMS) launched new Winterstorm and Severe Convective Storm Models to enhance its suite of catastrophe risk models for the U.S. and Canada. Built to satisfy the needs of both underwriters and risk managers, the models provide the insurance industry with a more complete view of risk and increase RMS’ coverage of natural catastrophe risk in North America to as much as 90 percent, the firm said.
The RMS U.S. and Canada Winterstorm Models explicitly assess losses from snow, ice, freezing temperatures, and extra-tropical winds. “Winter storms are complex weather systems that can produce various types and combinations of damage from different perils, making them extremely challenging to model,” commented Tom Foster, product manager at RMS. The new models analyze the individual and combined impacts of snow, ice, freezing temperatures, and wind to provide much more accurate damage estimates, he said.
In the last few decades alone, a number of winter storms have torn across areas of North America and caused substantial property damage, hitting both the primary insurance and reinsurance sectors, according to Foster.
“We calculate that if the 1993 Superstorm that descended on the eastern half of the U.S. were to reoccur today, for example, insured losses could reach $5 billion, mainly from the heavy snowfall and strong winds.”
Winter storm damage is estimated to account for around 10 percent of the total average annual loss in the U.S. and Canada.
To model the full range of possible future winter storms, RMS employs a “hybrid” approach that combines weather prediction modeling with statistical techniques. This results in high-resolution simulations of new winter storm events that are not limited by the relatively short historical record of information, according to RMS.
To complement its Winterstorm Models, RMS has also launched the new RMS U.S and Canada Severe Convective Storm Models. Severe convective storms produce damage from large hailstones, powerful straight-line wind gusts, lightning strikes, and deadly tornadoes. Outbreaks range from the local development of a single thunderstorm to large multi-day, multi-state events causing insured losses that can spiral into the billions. It is estimated that these storms have already resulted in more than $10 billion of insured losses this year.
The new models cover a broad geographic area that encompasses the most active region of severe convective storms globally, with the Midwest and Great Plains regions of the U.S. and the Prairie Provinces and Ontario in Canada at greatest risk. RMS says the models have been tested using weather observation data, such as radar interpretation, damage surveys and industry claims information.
“Models that rely purely on a catalog of past events tend to generate biased results, whereby the risk for certain regions is under or over reported depending on the historical record of catastrophes,” said Matthew Nielsen, product manager at RMS. “Rather than just looking at different versions of history, our new modeling approach allows us to capture the full range of possible storm behavior across the U.S. and Canada and dissect the geographical distribution of wind, tornado, and hail damage for each event.”
Source: Risk Management Solutions, www.rms.com