International catastrophe risk management and modelling firm, RMS, has received approval from the Colombian insurance regulator to provide catastrophe modelling services for earthquake risks in the region.
Colombian insurance regulator, Superintendencia Financiera de Colombia (SFC), has given approval for the RMS Colombia Earthquake Model to be utilised by national and global insurers and reinsurers that underwrite earthquake risk in Colombia.
This is the second earthquake model approval from the SFC in a week, as Reinsurancene.ws discussed recently that the regulator had approved the AIR Worldwide Colombian earthquake model for use by domestic players.
Firms that underwrite earthquake risk in the country are obliged to use SFC-approved catastrophe models, and the approval of RMS’ model alongside AIR Worldwide’s, provides domestic and international re/insurers with a broader set of data and modelling capacity to determine probable maximum losses, average annual losses, and the management of their capital reserves.
“Colombia has one of the highest seismic hazards in South America, with significant exposure concentrations on active faults, including three of its most populous cities– Bogotá, Medellín, and Cali. And yet, despite the country’s steadily increasing economic growth, insurance penetration is still low,” said Victor Roldán, Regional Head for Latin America, RMS.
The risk modeller’s Colombia earthquake model is just one of eight models in the firm’s suite of South America earthquake models, and RMS worked alongside leading South American seismology and engineering experts to develop the model.
The model suite also includes Argentina, Bolivia, Brazil, Chile, Peru, Ecuador, and Venezuela, explains RMS.
“Now, insurers can access the latest scientific understanding of the regional earthquake hazard and modeling capabilities from RMS to improve their risk selection and pricing. This will enable the (re)insurers to develop coverages to help strengthen the country’s resilience to earthquake risk while also improving their portfolios and capital reserves to grow their business,” said Roldán.
Improved modelling capabilities of earthquake risk in Colombia should provide insurers and reinsurers with a more comprehensive view of the exposure, which should enable more adequate and effective risk assessment, ultimately resulting in more affordable and effective policies for the end consumer.