Impact Forecasting, Aon Benfield's catastrophe model development team, has developed new, realistic disaster scenario (RDS) models to estimate the cost of floods in China and Vietnam.
The 2011 Thailand flood was the costliest global flood event causing USD16bn of insured losses, while last month’s seasonal rains produced flooding across parts of Thailand, China, India and Pakistan resulting in more than 800 fatalities, damage to 600,000 structures and combined economic losses in excess of USD20 billion.
These events have brought the issue of non-modelled perils and territories in Asia to the fore and initially triggered Impact Forecasting’s development of the probabilistic Thailand flood model in 2012. The team has developed a range of RDS models for various perils to further bridge the coverage gap and offer an immediate solution as a stepping stone for more in-depth probabilistic models to come as part of the firm’s ongoing strategy.
In relation to flood, Impact Forecasting has considered the peak exposure zones in emerging economies with growing insurance penetration and where flood hazard will drive the probable maximum loss (PML). As part of this process, models have been developed for:
- China: The Pearl River Delta in Guangdong province, one of the most densely urbanised regions in the world and a key economic hub, and the Lower Yangtze River including Shanghai
- Vietnam: Ho Chi Minh City in the South on the River Saigon and Hanoi Province in the North by the Red River
The models are available on Impact Forecasting’s transparent and customisable loss calculation platform, ELEMENTS, to help insurers make more informed decisions on accumulation, reinsurance purchasing, pricing and underwriting through:
- detailed modelling for hazard and vulnerability including uncertainty
- industry exposures and losses by line of business
- ability to run residential, commercial, general industrial, industrial estates and engineering portfolios
Adityam Krovvidi, Head of Impact Forecasting for Asia Pacific, said: “Data is at the heart of these models. We’ve gone the extra mile to gather the most comprehensive data on flood hazard and defences through field surveys, liaison with government departments and investment in high quality data – for example digital terrain data at a 5m x 5m resolution in Vietnam. These RDS models are part of a much bigger plan that already includes numerous RDS across a wide range of perils such as earthquake, flood, volcano and riot. While we are in the process of expanding our probabilistic model coverage for the region, the realistic disaster scenarios offer a breadth of Asian coverage.”
Malcolm Steingold, CEO of Aon Benfield, Asia Pacific, added: “Speed of development is critical. These models are vital to help insurers and reinsurers take advantage of the additional capacity in the market and help transfer flood risks. Notably, this can also provide new opportunities for government schemes to explore how they can further support their people in times of catastrophic events.”
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