Reinsurance News

Aon expands coverage of Europe windstorm & SCS models

9th March 2023 - Author: Kane Wells

Aon has updated its Impact Forecasting Europe Windstorm and Severe Convective Storm (SCS) catastrophe models to incorporate emissions scenarios that inform current and future projections of climate and storm activity across the continent.

According to Aon’s Catastrophe Insight data, windstorms have long been a major peril for European insurers and reinsurers, with average annual losses totalling $3.3 billion.

The firm notes that since 1980, windstorms in Europe have caused a total insured loss of $141 billion, while Severe convective storms have incurred $89 billion in total insured loss, with an annual average of $2.1 billion.

Since 2000, SCS events have even outpaced winter storms, as the peril has accumulated insured $78 billion in insured losses, while windstorms resulted in $77 billion in cumulative losses.

The firm’s windstorm model now covers 22 countries, having recently been expanded to include Iberia (Spain and Portugal), the Baltics (Estonia, Lithuania and Latvia), Hungary and Switzerland, in what Aon describes as “recognition” of the importance of quantifying loss potential in these regions that in the past have not been well modelled.

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Meanwhile, The SCS model allowing flexible hours clause application to the results now covers 12 countries, expanding to Slovakia, Hungary and Italy.

Aon states that the updated models allow clients to better forecast their European exposures to assist with portfolio management and capital allocation and help fulfil ESG requirements.

The firm writes, “As risk management teams, boards, regulators and rating agencies are increasingly asked to evaluate climate risks, the model helps by incorporating future climate projections across a range of emissions and timeline scenarios to help quantify the uncertainty of climate change impacts from European storm events.”

The model is available on Oasis-based platforms such as Impact Forecasting’s ELEMENTS, the Oasis Loss Modelling Framework and Nasdaq Risk Modelling for Catastrophes.

Aon adds that it can be customised and adapted for specific lines of business, or with additional claims information to better quantify a re/insurer’s catastrophe view of risk.

Adam Podlaha, head of Impact Forecasting, commented, “For more than 10 years, our European windstorm models have been helping re/insurers and corporations to quantify and assess their exposures, in order to make better business decisions as regards insurance premium calculation, reinsurance purchase, capital requirements, and claims handling.

“In this geographical expansion of the windstorm model, the vulnerability component is the main feature of the update. Based on five seasons of loss forecasting, the team has improved the damage functions to better reflect losses caused by smaller to medium storms.”

Podlaha continued, “In addition, more residential classes have been added to better align to insurers’ data. Finally, introducing Open Exposure Data classes to the model in both ELEMENTS- and Oasis-based platforms, aligns it to client and market requirements.”

James Lay, Commercial Director, Nasdaq Risk Modelling for Catastrophes, said, “Mounting losses caused by natural catastrophes, the impact of climate change and intense regulatory scrutiny means businesses are under pressure to better quantify their exposure and improve resilience to catastrophe risk.

“Despite the more subdued activity in recent years, European windstorms remain a major peril and this represents a significant upgrade, adding to the depth and sophistication of models available on our platform.”

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