EQECAT’s new RQE risk modeling platform will ‘benefit all segments of the ILS market’

by Artemis on February 1, 2013

Yesterday, risk modeling firm EQECAT announced the official release of the latest evolution of its catastrophe risk modeling platform. The platform called RQE™ (Risk Quantification & Engineering) version 13 replaces WORLDCATenterprise™ and is the result of a multiple-year development initiative involving collaboration with clients, prospects and the industry. With RQE EQECAT aims to enable better quantification and management of the financial impact of natural hazards.

The RQE platform features significant advancements on EQECAT’s previous platform, but maintains what EQECAT calls its ‘robust methodology and unique treatment of uncertainty‘, which it says are hallmarks of EQECAT risk modeling.

Outside of the core insurer and reinsurer market for risk models,  EQECAT believes it has produced a platform that will benefit all areas of the catastrophe bond and insurance-linked securities (ILS) community, from issuers or sponsors to investors and catastrophe risk asset managers. We discussed a number of the enhancements within RQE and their relevance to the ILS and cat bond market last April with Kent David, Vice President of EQECAT’s Consulting Services Group, and he told us at the time to expect a platform that would “Provide an unparalleled ability to deeply understand risk associated with cat bonds and ILWs.”

We followed up with Kent again yesterday and received the following statement, reproduced in full below:

One of the most exciting aspects of the new RQE™ (Risk Quantification & Engineering) platform that will benefit all segments of the ILS market is the enhanced statistical framework underlying the platform. This framework is expressed to EQECAT users in the Year Loss Table (YLT). With 300,000 years of simulations, the YLT provides the ability to represent tail risk comprehensively and without the volatility associated with smaller simulation sets. In addition, the YLT output format allows users unparalleled insight into the EQECAT view of risk, as well as the ability to manage risk simply, either within the RQE platform or in external systems.

With complete consistency between the RQE YLT, the RQE Event Loss Table (ELT) and all output risk metrics, the release of RQE 13 will provide users in the ILS space keen insight into not only the basic risk metrics associated with a transaction, but also into the uncertainty associated with these risk metrics. 3G Correlation™ underlying the RQE output provides EQECAT clients in the ILS markets the best of both worlds – ease of use, and full realization and access to the modeled recognition of the complexities of uncertainty and correlation in rationally assessing risk.

The new RQE platform minimizes basis risk to issuer and investor alike with its industry leading 4-tier financial model. The model can represent the intricacies of current insurance industry practices, as well as capturing the subtleties of related peril sub-limits such as might apply to flood losses resulting from a hurricane.

Finally, the release of RQE v. 13 includes the update of 178 country/peril models including vulnerability, hazard, and correlation/simulation updates. State of the art earthquake model updates for Australia and China will support transfers of risk through the ILS markets in these regions using the most current representation of the risk available.

Also commenting on the launch of RQE, Bill Keogh, president of EQECAT, said; “We are thrilled that RQE will provide significant and increased value to the global re/insurance market. With so much that differentiates us competitively, we look forward to satisfying the pent up demand for our analytics. Having collaborated closely with leaders from virtually every segment and geography in the global re/insurance business, we are confident that RQE will disrupt the status quo of catastrophe risk modeling. All of us at EQECAT thank our existing and new clients for their collaboration throughout this development process and their confidence in RQE.”

You can read the full press release on RQE’s launch here and find more details on the RQE v.13 platform here.

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