Dual radar mapping to increase re/insurers understanding of hail risks

A dual-polarization, radar mapping system for hail has been made available to the insurance, reinsurance and insurance-linked securities (ILS) industry, delivered by Verisk Climate, through Verisk Insurance Solutions’ software suite, Benchmark.

Verisk Climate, a provider of climate risk management solutions and a Verisk Analytics unit, announced the availability of the new radar technology for the coming year, enabling companies “to map more precisely where hail falls and how severe it is.”

The climate risk specialist explained that using dual-polarizing technology enables the radar data to “be used to categorize the objects being hit,” as opposed to traditional radars that only measure the intensity “of falling precipitation.”

The difference here being that by releasing horizontal and vertical energy, instead of just the horizontal as before, it’s now possible to differentiate between heavy rain and hail.

The report notes that this dual element, coupled with the National Weather Service’s new radar scanning pattern that collects ground data every two minutes instead of five, gives a far more realistic picture of hail severity and potential damage.

Any advancement in the understanding of hail severity is of great importance to reinsurance, collateralized reinsurance, ILS and catastrophe bond players.

“For customers, the advantage is a continuous hail swath based on direct observation, meaning that users will receive more precise hail map for every storm, particularly those that are fast moving,” explained Verisk Climate.

For cat bonds, hail is included in the majority of severe thunderstorm and tornado peril classifications, of which a large amount of the current outstanding cat bond market is currently exposed to. It’s also worth noting that in some named storm (or hurricane) cat bonds a portion of any damages or losses incurred could be caused by hail which frequently is seen during these tropical events as well.

According to our analysis of the Artemis Deal Directory, outstanding U.S.-focused cat bonds with an exposure to severe thunderstorm as a named peril amount to roughly $3.1 billion of the catastrophe bond markets capital at risk.

And this figure doesn’t include the portion of the collateralized reinsurance market which will be exposed to hail events, which is likely a similar percentage or greater than we see of the outstanding cat bond market.

Over time, the volume of capital in ILS and reinsurance funds with an exposure to hail events is growing steadily, especially as private ILS deals, collateralized reinsurance and structures such as sidecars grow and become more all encompassing in terms of perils they are exposed to.

Artemis reported an insight into the potential severity of the peril earlier this year, when insured loss estimates from the intense convective hailstorm in Brisbane, Australia reached AUD$1 billion. Giving reinsurers and ILS funds a cause for concern.

Prior to this, Artemis discussed the view of RMS that extreme hail events were rising enough to warrant being a stand-alone peril, instead of an attritional loss within hurricane and tornado deals.

RMS’ statement followed the hail events in Europe during 2013, which resulted in huge insured losses of roughly $5 billion.

So it’s easy to see why more comprehensive and accurate hail data is valuable to participants in the global risk industry.

Patrick Pollard, Vice President of Insurance Solutions at Verisk Climate, concluded; “Although other vendors may not believe dual-polarization is useful for hail measurements, our scientists have confirmed that dual-polarization materially improves accuracy in delineating and categorizing hail size.

“Once again we’re pushing the boundaries of physical and data science to transform how businesses prepare for and react to weather.”