Navigating hurricanes with real-time forecasting
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A hurricane near you: the opportunities in real-time hurricane forecasting
Until recently, forecasting hurricane landfall on the US coastal states was an imprecise science. Backtesting has shown that rolling a pair of dice would have been as effective as sophisticated models. And a lot cheaper.
Creating meaningful forecasts of hurricane activity within a specific time period (a week or month in the summer) has been hard and arguably impossible in the past for many reasons. The multi-decadal changes in hurricane frequency, localised changes in the weather around the world, the presence of El Nino and its cousin La Nina and the longer-term impacts of climate change all influence the formation of devasting hurricanes. We can’t blame all the uncertainty on that single butterfly flapping its wings, but the reality is not far off.
Suffice it to say, there are lots of variables that can have massive impacts. And a few miles one way or the other at landfall can lead to billions of dollars of devastation or an event that barely makes the news.
But as we learnt during our event on the 23rd July supported by Reask and EigenRisk, information is becoming available now to insurers and investors that can make a meaningful difference to loss reduction when forecasting near-term hurricane loss.
Today, investors in catastrophe bonds such as Securis, are able to provide daily updates of their portfolios to support trading of bonds or “marking to market” by using the latest forecasts and probabilities of hurricanes with up to two weeks outlook. MGA Vave can automatically close down underwriting for a period of time in areas that are potentially in a hurricane’s path by tapping into hurricane forecasts. Inigo Insurance employs Ruth Petrie and her colleagues to monitor the forecasts and provide guidance to underwriters on what prices to charge for hurricanes at regular updates during hurricane season and helps the company manage its portfolio of hurricane reinsurance coverage.?
Hurricane activity can go up or down in the summer months depending on other weather systems, phenomena such as dust storms in the Sahara and sea surface temperatures. Hurricanes wobble right, or occasionally left at the last minute, speeding up or slowing down. Hard to keep up with but no longer impossible, and better than that pair of dice.?
Many people, ourselves included, have been wondering if insurers would ever be able to harness IOT and sensors from buildings to offer real-time underwriting. With a few exceptions that still seems a long way off, however near real-time hurricane forecasting has arrived at an underwriter near you.
A recent episode of the InsTech podcast features Deepak Badoni, Co-founder of EigenRisk Inc., discussing how its platform centralises catastrophe risk analytics for insurers. Join us as we explore the role of simplified analytics in enhancing decision-making for insurers during the hurricane season and insights into the challenges of building this one-stop solution.
Events of interest
CoreLogic’s INTRConnect Europe 2024 will bring together insurance and restoration industry leaders on 17th September 2024, in London. Last year we spoke to over 400 people at the event and this year’s topics include panel discussions on market trends, consumer responsibilities and property data.
In our recent webinar with CoreLogic Unlocking the value of accurate property data, we discussed the importance of accurate property data in underwriting decisions, new data sources available to insurers, best practices for data utilisation and how to navigate the challenges of conflicting data.
Climate and Cat Risk news
The recent magnitude 7.1 quake caused relatively little damage and led to a tsunami warning that was soon lifted. However, following this event, concerns of a subsequent megaquake in the Nankai Trough has led to significant cancellations in Japan’s tourism sector, particularly affecting the Kyushu region. Hotels and events in Miyazaki and Kochi Prefectures report numerous cancellations, highlighting potential economic impacts.
Insured losses from wildfires in Canada and the US are increasing, with 574 active fires in Canada and 95 in the US up to 1st August this year, according to Aon. Significant fires include the Jasper National Park fire in Alberta, burning 96,000 acres and destroying 358 structures, and the Park Fire in northern California, which has burned nearly 395,000 acres and destroyed 540 structures. Total economic and insured losses from these fires are expected to reach hundreds of millions to possibly billions of USD.
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Moody’s reports that most insured losses from Hurricane Debby, which made landfall as a Category 1 storm in Florida, are anticipated to remain within primary insurers’ retention levels under their reinsurance agreements. The storm caused significant flooding and rainfall across Florida, Georgia and South Carolina, but insurers are retaining more risk this season due to higher attachment points.
PERILS has released an initial industry loss estimate of €1,6 million EUR for the floods in Bavaria and Baden-Wuerttemberg from 21st May to 6th June 2024. The flooding was caused by the Atlantic low “Orinoco,” resulting in extreme rainfall over southern Germany.
Global insured losses reached $62 billion USD in the first half of 2024, driven by severe thunderstorms, flooding and forest fires, significantly surpassing the ten-year average of $37 billion USD. The largest losses were attributed to weather-related disasters, with North America heavily impacted, and an increase in non-peak perils contributing to 76% of insured losses.
Industry updates
Floodbase has partnered with Amwins to introduce “Tees-to-Green,” a parametric flood insurance program for US golf courses. The coverage automatically triggers payouts based on satellite-monitored flood severity, covering lost revenue and repair costs when courses are unplayable due to flooding.
Howden Re has partnered with Temblor Inc. to utilise its SiteAmp model for assessing earthquake risk and impact in Turkey. The partnership may expand to other earthquake-prone regions in Europe, Asia and South America.
First Street has closed a $46 million USD Series A-1 funding round, led by Innovation Endeavors, to scale its physical climate risk modelling internationally. The funding will support First Street’s development of a new tool to measure risks including floods, wildfires and hurricane winds for property portfolios.
The International Underwriting Association (IUA) and the Lloyd’s Market Association (LMA) have introduced a Sustainability Data Standard comprising 22 questions to streamline the disclosure process for insureds. This initiative aims to standardise the collection of sustainability data, reducing the burden on insureds and ensuring consistency across insurers’ requests.
A report from the Chartered Insurance Institute (CII) New Generation Underwriting group identifies TikTok and a focus on ESG, including climate change, as key strategies for attracting Gen Z talent to the insurance sector. The report recommends leveraging social media and promoting commitments to emerging risks and sustainability to address the industry’s talent shortage crisis.
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Leading Business Development and Operations in the Energy and Environmental Science
6 个月This was a great summary of the challenges faced and was interesting to read after I had the chance to briefly chat with Deepak Badoni at the recent InsTech event. If we can harness technology to increase our ability to forecast interannual variations in severe weather events then there should be significant value for the Insurance sector. Hopefully a strong tie in for your work here at Viridien trying to improve Climate predictions Nicholas G. Heavens? #HPC #Climate #Viridien