Catastrophe modeling firm AIR Worldwide (AIR) announced that its earthquake model for Colombia has been approved by the country’s insurance regulator, the Superintendencia Financiera de Colombia, for use by domestic insurance companies in managing their earthquake risk.
“The Colombian government has worked for several years to develop new policies that protect the solvency of the domestic insurance industry while making the reserving process more transparent,” said Boston-based AIR Worldwide in a statement.
As with Solvency II, Colombia has tied reserve capital to an analytical measure of a company’s exposure to catastrophic loss from earthquakes, explained AIR, a subsidiary of Verisk Analytics.
Following the enactment of several regulatory decrees, insurers are required to use an approved catastrophe model to calculate their portfolios’ maximum probable loss and pure risk premium, AIR said.
“With this new approval, local insurers can work directly with AIR Worldwide and obtain expert modeling services and direct access to the models to satisfy regulatory requirements while giving companies a distinct advantage in preparing for the next earthquake in the region,” said Rob Newbold, executive vice president at AIR Worldwide.
AIR said its recently updated model for Colombia incorporates the latest scientific data “and is the first to provide an integrated view of loss due to ground shaking, tsunami and liquefaction.”
The model features new damage functions for high-value industrial facilities, builder’s risk, and public infrastructure, AIR said. The model also facilitates the remodeling of historical events such as the 1999 earthquake, which significantly damaged the city of Armenia in Colombia’s coffee growing region, the modeling company continued.
“To continue to protect the strong growth of South America’s insurance markets, regulators are largely moving to establish model-based capital requirements more reflective of the actual risk faced by the region,” continued Newbold.
He noted that Peru was the first South American country to approve AIR’s earthquake model in December 2015.
Source: AIR Worldwide
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