Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

AIR’s Touchstone implemented by 90+, probabilistic flood model to come


More than 90 insurance, reinsurance and insurance-linked securities (ILS) companies have implemented risk modelling firm AIR Worldwide’s new Touchstone platform, since its launch in January 2013, to help them manage their catastrophe risks.

AIR’s Touchstone has gained wide acceptance across the global insurance, reinsurance and ILS marketplace by some of the largest insurers, reinsurers, asset managers, and intermediaries, including companies such as China Re P&C, Endurance, Everest Re, Fermat Capital Management who we covered here when they adopted Touchstone, Korean Re, Mitsui Sumitomo Insurance, and XL Re Ltd.

Touchstone version 2.0 was released in July 2014, adding he ability to account for both catastrophe and non-catastrophe risks in a single platform, providing users with a single view of their exposures.

“Touchstone is helping us execute on our core principles, including disciplined underwriting, careful management of exposures and accumulations, and the deeper analytics required for effective catastrophe risk management,” commented Erick Davidson, cohead of catastrophe modeling at reinsurance firm Everest Re. “Within days of deploying Touchstone, we were seeing considerable benefits, allowing us to run more analyses in significantly less time. We also greatly appreciate the flexibility to deploy Touchstone in the manner best suited for our specific needs.”

“We’re pleased with the functionality and ease of use of Touchstone, which allows us to run much more sophisticated and complex analyses,” added Sen Chen, deputy general manager and chief actuary, China Re P&C. “Touchstone’s intuitive metrics and dynamic dashboard enable us to better understand risk and communicate it to our various stakeholders. We’re equally impressed with AIR’s continued presence and focus on the evolving insurance market in China and on providing innovative solutions for this region.”

“While we’ve invested and will continue to invest in Touchstone, we’re just at the start of a multiyear effort that will that make Touchstone the cornerstone of our clients’ business analytics,” Bill Churney, COO, AIR Worldwide said. “We’ll continue to build Touchstone to offer even more flexibility, a broader range of analytics, and seamless integration of catastrophe modeling with the broader risk management landscape.”

Touchstone allows its users to gain a deeper understanding of their risk exposures and enterprise-wide loss potential, develop insight into drivers of uncertainty, generate information on demand to help make the right business decisions, and communicate the risk in clear language to stakeholders. Touchstone features dedicated modules for assessing and improving data quality, understanding location-level hazard, performing geospatial analytics for both modeled and nonmodeled countries using advanced GIS and mapping techniques (including flood hazard maps), and performing detailed loss analyses at run times far faster than previously possible.

Rob Newbold, SVP, Business Development and Consulting & Client Services at AIR, spoke with us about the traction being seen with the firms platform. “Touchstone is being widely adopted by both new and existing clients from right across the market. Underwriters, brokers and increasingly ILS specialists are all adopting, or showing interest in our risk models.”

AIR is also soon to release its fully-probabilistic flood model, which Newbold explained would be coming early in the third-quarter. The high resolution, probabilistic model is likely to receive a warm welcome from the industry looking for improved U.S. flood modelling to enable risk transfer transactions.

The flood model is based on a stochastic catalog and features a full Monte Carlo simulation. Newbold told us; “The flood model has applicability for ILS we believe.”

Newbold explained that the flood model could be used both for parametric transaction structures, but also he feels for an indemnity catastrophe bond transaction as well.

“We feel it’s ready for indemnity and is suitable for modelling a transaction based on a cedents portfolio. It could also be used for creating and modelling localised parametric products,” Newbold told Artemis.

AIR is also working on an update of its U.S. storm surge model, which Newbold said should be ready for Summer 2015.

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