RMS ‘Underwriting Toolkit’ Provides Instant UK Property Risk Assessment

Risk Management Solutions has launched its “Underwriting Toolkit,” which it describes as “designed to help underwriters and pricing managers accurately assess and rate risk for individual buildings impacted by key UK perils – flood, storm surge (coastal flooding) and windstorm. The Toolkit allows property risk to be viewed in a map and quantified in seconds.”

RMS added that the toolkit features the following:
— Allows insurers to differentiate flood risk within a postcode, where losses could vary by thousands of pounds depending on exact location
— More efficient screening of flood, storm surge, and windstorm risk dramatically reduces the number of quotations referred

RMS also explained that in the current economic climate, where investment income has declined, “underwriters are under even greater pressure to ensure their underwriting practices are commercially sustainable. For a peril like flood, the risk varies dramatically within a postcode, making it crucial to accurately assess the impact of a property’s location, building type, and construction.

“The RMS® Underwriting Toolkit provides residential and commercial property underwriters with metrics – including average annual loss and return period flood depths and wind speeds – which can be easily incorporated within their underwriting workflows for risk screening and rating. These metrics are derived from RMS’ catastrophe models and calculate the risk from both frequent and extreme events.

The UK is densely populated, and, as RMS observes, losses can vary greatly within very close distances. As an example the bulletin cites a home “insured for £125,000 [$207,000] located at the bottom of a hill, losses from 1.5 meters (about 5 feet] of major river flooding could be as much as £16,000 [$26,467], while an identical house in the same postcode situated half way up the hill would incur losses of around £500 [$827] from surface water flooding, and one at the top would suffer no damage.

“Despite their various locations on the hill, the fact that the houses are within the same postcode and of equal value means the risk would traditionally be considered the same and they would be assigned the same flood rate. The RMS® Underwriting Toolkit enables a more accurate risk calculation by offering a higher resolution than postcode level.”

In addition RMS pointed out that by employing its new toolkit underwriters can reduce their risks “by 300 percent or more, as only a few properties within a postcode are likely to be at risk of flooding.”

Elizabeth Couchman, senior product manager at RMS, added: “Depending on an insurer’s risk appetite, they may only wish to decline properties that are at very high risk of flooding, or where flood water exceeds the level where simple flood defenses like sandbags become less effective.”

Both the Pitt Review [an investigation launched following the floods of 2007] and the Government’s draft of the Flood and Water Management Bill propose that better tools are needed for assessing flood risk and identifying properties at risk outside of the major river floodplains. “The Underwriting Toolkit examines all sources of flooding and includes risk assessment maps for events ranging from once every 10 years on average, to more extreme scenarios which occur around once every 1,000 years,” Couchman explained. “By having a better handle on a property’s risk profile, underwriters can decide how much business to write in specific areas, and ensure they receive enough premium income to adequately cover their risks.”

The RMS® Underwriting Toolkit can be accessed via a Microsoft Excel® interface with built-in mapping, or integrated directly into insurers’ underwriting systems using webservices.

Source: Risk Management Solutions – www.rms.com