Impact Forecasting, Aon Benfield’s catastrophe model development centre, has launched a new hail model for the South African re/insurance market in response to the growing frequency and severity of hail-related claims in the region.
In South Africa, hail is a regular natural peril, and has been the main driver of catastrophe claims over the last five years, causing insured losses of US $87 million in October 2012 and $119 million in November 2013 alone.
The new model is designed to help re/insurers better understand the nature of hail events and how they affect policyholders, and to better quantify and manage the associated risks for both property and motor.
Pieter Visser, Catastrophe Analyst at Aon Benfield, commented: “Local insurers are now retaining more hail losses than ever before so the new model is therefore a critical tool to quantify this risk.
“With increasing competition and more punitive catastrophe pricing, any information to optimize reinsurance in the working layers can save clients several millions in cost. The hail model directly addresses this need.”
Until now, catastrophe reinsurance retentions for insurers in South Africa have been unusually low to reduce volatility, but Impact Forecasting predicts its model will afford clients a competitive advantage by allowing them to determine how targeting specific markets may affect their volatility.
Model Developer Lukas Braun explained: “Significant hail events over the last five years have put this peril back on the radars of insurers but they were lacking information on severity and frequency.
“Now we have created an event set of 10,000 years with hazard based on 30 years of data from South Africa. This gives confidence to insurers to buy the most appropriate reinsurance and underwrite while managing the hail loss potential.”
