RMS expands and upgrades Europe Windstorm Model

Risk Management Solutions (RMS) has announced the release of an expanded and upgraded version of their Europe Windstorm Model. The new version now offers coverage across 15 countries in Europe through the addition of Poland, Slovakia and the Czech Republic and a much improved dataset with inclusion of analysis of over two million claims and 135 historical storms from the past 40 years.

It’s the first time the model has been updated since 2006 meaning that recent European windstorms such as Kyril (2007), Emma (2008), Klaus (2009) and Xynthia (2010). Inclusion of data from claims resulting from those storms will help to bring the model right up to date with the latest damage and claims data providing much deeper insight into windstorms which affect Europe.

“To our knowledge, version 11.0 is the only example of such a comprehensive and realistic event set available in a commercial catastrophe model,” said Stefan Beine, senior director at RMS. “We used advanced modeling techniques to broaden the range of possible events that could occur and produce highly detailed storm footprints.”

“The enhancements to our Europe windstorm model will ultimately empower companies to make more realistic capacity allocation and capital management decisions, as well as help to determine appropriate reinsurance structures and pricing,” said Ryan Ogaard, senior vice president of Model Solutions at RMS.

Now, our readers will be wondering what impact on loss estimates the model update may have, especially considering the recently released U.S. hurricane model upgrade. RMS say that the enhanced data set, particularly of high-frequency, low-severity events, they expect to see increases in the average annual loss in most regions more closely matching historical experience. They say that the inclusion of many smaller storms in the model makes it a more complete view of loss from the full range of windstorms.

“Europe windstorms are a complex phenomenon, and the region contains a diverse array of geographic features, building practices and market conditions. All of these factors combine to create a wide variety of model result impacts that are highly dependent on a company’s unique risk profile,” said Mr. Ogaard.

This is a reasonably large upgrade to the RMS Europe Windstorm Model and brings their datasets and modelling tool right up to date with the latest loss experience from windstorms in Europe. As a result of the more complete dataset, it is natural that a slight increase be seen in the average annual loss across most geographic areas and lines of business. This can only be beneficial to those seeking to issue European windstorm catastrophe bonds which have, historically, proved more difficult to price than say U.S. hurricane cat bonds.