RMS adds Asia-Pacific tropical cyclone & earthquake risk models

Risk modelling and analytics firm RMS has announced the launch and roll-out of new typhoon models (for both wind and flood) for South Korea and Taiwan, and new earthquake models for Singapore, Malaysia, Thailand and Vietnam, which it hopes will help to stimulate growth opportunities for insurance and reinsurance targeting the region firms.

Risk models inform underwriting decisions and in many cases the ability to underwrite a particular peril efficiently, with an enhanced view of risk helping to ensure insurance and reinsurance capacity is deployed sensibly. As such new risk models in the Asia-Pacific region can help to stimulate insurance market growth.

RMS has launched the RMS® South Korea Typhoon Model and the RMS® Taiwan Typhoon Model, which add to existing typhoon models for Japan and China in the region.

On the earthquake side, RMS has launched the RMS® Vietnam Earthquake Model, the RMS® Singapore Earthquake Model, the RMS® Malaysia Earthquake Model and the RMS® Thailand Earthquake Model, which add to seven other earthquake risk models it already has available for major economies in the region.

Mohsen Rahnama, RMS chief risk modeling officer, commented on the launch; “the scope of new models our teams are bringing to the Asia-Pacific market is unprecedented, and RMS is now able to offer typhoon and earthquake risk analysis across multiple countries in the region, enabling clients to grow and diversify their portfolios with confidence, using the market-leading science and analytics for which RMS is known.”

RMS calls the typhoon models, “the most advanced on the market”, saying that the South Korea and Taiwan Typhoon Models will offer users the analytics required for improved risk selection and pricing, with a comprehensive view of risk using the latest science on the peril in the Asia-Pacific region.

Importantly, typhoon flood risk is modelled as well as wind, which is often a major contributor to losses from typhoons in Asia-Pacific.

“The new RMS models help clients to identify the most profitable locations for writing new business, and to determine which areas are driving losses, with the tail risk from typhoon-driven flooding reflected in the models robustly. This ensures clients can analyze the vast majority of potential losses at longer return periods, and so calculate their capital requirements and reinsurance needs more confidently,” RMS explained.

“We have used all our experience and expertise from tropical cyclone modeling across the globe to develop these new models for South Korea and Taiwan,” Rahnama said. “Although non-life premium growth in these territories has been strong, penetration remains low and this is a significant opportunity for insurers and reinsurers to bridge this protection gap, if they have the most robust understanding of the risk. RMS is now providing that.”

The new Southeast Asian earthquake risk models, Singapore, Malaysia, Thailand and Vietnam, which join existing models for Philippines and Indonesia, will, “Enable clients to accurately assess portfolio accumulations, reinsurance capacity, capital requirements, and the risk to large accounts, because the correlation and diversification of risk across and between countries can now be viewed consistently throughout this fast-growing region.”

Rahnama explained; “With Southeast Asia among the fastest developing regions in the world, there is a huge opportunity for our clients to underwrite this increasing exposure if they can accurately represent potential future losses from individual risks to treaty reinsurance. These new earthquake models will help them to do this. They can use the same view of risk for portfolio and accumulation management, so safely expanding their business. Together with our other regional earthquake models for Taiwan, China, Japan, New Zealand and Australia, our clients now have the deepest insights into seismic risk across the Asia-Pacific region.”

RMS also said that it is in the process of developing a flood model for India to help re/insurers manage high losses from both river and pluvial flooding due to intense rainfall which can be a major problem in the largest cities, due to rapid urbanisation. This fully probabilistic flood model for India is due for release next year, the company said.

Better risk modelling in Asia not only helps insurers to narrow the protection gap, reinsurers to better understand the risks they can assume and therefore secure more underwriting opportunities, but will also allow insurance-linked securities (ILS) managers to deploy more capacity to the region, in collateralized form.