Impact Forecasting, the catastrophe model development center of excellence at Aon Benfield, has launched the first catastrophe model for the East Africa region. The model quantifies the financial impact of earthquakes and in turn allows insurers and reinsurers to gain a better understanding of their exposures in this growing market.
Areas of Kenya, Tanzania and Uganda are seismically active and prone to earthquakes due to their position in the East African rift system. The region is prone to earthquakes as the rift system has two tectonic plates which are separating and diverging. There have been a number of recent earthquakes (Lake Tanganyika, M6.8 in 2005 and Arusha, M6.0 in 2007) which have affected the region. Similar events could more strongly affect Kampala, Nairobi and other major cities, which would have implications for the insurance and reinsurance markets.
The model is developed using the latest earthquake data from local and international experts, including the University of Pretoria Natural Hazard Centre Africa. To assess the impact of the hazard against the building resilience, the model analyses over 500,000 events against three occupancies (residential, commercial and industrial) and 24 structural types including three height and age categories. Portfolios can be modelled using CRESTA and State administrative levels.
The model brings the following key benefits for insurers and reinsurers underwriting business in the region:
- Ability to model loss to both property and life to in turn shape reinsurance buying
- Model can also be used for underwriting purposes of large commercial and industrial risks
- The model is available in ELEMENTS, Impact Forecasting’s loss calculation platform, which is transparent with detailed documentation, open and with customisation possibilities for individual clients including custom vulnerability functions, adding new events etc.
Simon Chikumbu, CEO of Aon Benfield Africa, said: “The African economies are growing pretty fast and so will insurance penetration in the region. Insurers and reinsurers in Kenya, Tanzania and Uganda are therefore seeking a greater understanding of the seismic risk in the region. This is to gain greater knowledge and better insights of their exposure and enable better decisions on matters such as capital, risk pricing and reinsurance requirements Up to now very little scientific research has been put into action in such a model to understand this risk in the region.”
Chris Ewing, catastrophe model developer at Impact Forecasting, added: “The East Africa earthquake model is an important addition to Impact Forecasting’s African Earthquake platform, which also includes South Africa and the Maghreb region. Impact Forecasting is committed to supporting our clients and catalysing their growth in the right direction, with the right tools in regions where no other modelling solutions exist.”
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