A pioneering tool that offers a detailed view of global potential tsunami events was recently announced by leading catastrophe risk modelling firm, Risk Management Solutions (RMS).
The tool, branded ‘RMS Global Tsunami Scenario Catalog,’ is an industry first and “provides the most comprehensive global coverage of potential tsunami events on major subduction zones around the world,” explains RMS.
The Catalog will aid in the pricing, underwriting and overall understanding of the peril’s exposure for insurance and reinsurance firms that write business along vulnerable coastlines.
As a growing number of residents choose to live in coastal regions in many parts of Asia and across the globe, coupled with a rise in the general asset worth of these regions through increased urbanisation, the impact of a tsunami can be hugely negative on regional and national economies.
Plus, the gap between insured and economic losses from adverse weather events in these areas of the globe, and in particular with Asia is usually too vast, owing to low levels of insurance penetration.
As a greater understanding of the likelihood and potential economic impact of tsunamis is achieved, this should create a more affordable, policy-friendly environment, helping to narrow the insured-economic loss gap.
Dr. Renee Lee, tsunami expert and senior product manager at RMS, commented; “To minimize the losses and operational impacts caused by large tsunami events, underwriters and risk managers need the ability to understand the risk and then quantify the potential damage to individual locations.”
The software utilises nearly 30 high-resolution tsunami inundation footprints from around the globe, produced from magnitude 8.9 to 9.6 mega-thrust earthquakes on subduction zone plate boundaries, the press release states.
As well as using historical tsunami event information for the global footprints and scenarios, RMS’ tool also demonstrates the potential impact of tsunami scenarios that are not within historical records.
The company confirmed that; “Each footprint provides the maximum inundation depth and extent for the impacted multi-country coastlines so that users can estimate the physical damage to local building stock.”
The modelling of the Catalog takes into account the full life cycle of a tsunami, from initial wave generation to coastal impact, and draws upon the historical wave height data from five of the largest magnitude quakes since 1900, including the 2011 Tohoku, Japan event.
Following the devastating impact of the 2011 Japan tsunami, Willis Re launched a Japan tsunami risk model towards the end of last year, as covered at the time by Artemis.
Willis Re’s tool, like the RMS Global Tsunami Scenario Catalog will prove invaluable to insurers, reinsurers, insurance-linked securities (ILS) and catastrophe bond players, as many earthquake reinsurance or retrocessional covers also protect losses from the tidal waves caused by tsunamis.
With a better understanding of tsunami risks it is likely that we will see the risk included in an increasing number of earthquake catastrophe bonds.
Any advancement on the understanding of the potential impacts of a tsunami is incredibly useful to capital market players and ultimately to the residents that live in susceptible regions.
A greater knowledge of the results of such an event will lead to better underwriting and more accurate pricing, which should hopefully lead to a wider local knowledge and more affordable coverage options for those in need.
Dr. Lee concludes; “Tsunami events have the potential to be highly catastrophic, and until recently, the industry has struggled to adequately assess this previous non-modelled and complex risk.”