RMS upgrades European windstorm model

The firm claims the model now offers complete, seamless coverage across 15 countries - including three new Eastern European countries, Poland, Slovakia and the Czech Republic - providing clients with a consistent view of risk and new insights into portfolio diversification opportunities.

Since the last model update in 2006, RMS said it has examined over two million individual claims, integrating lessons from damaging windstorms including Kyrill, Emma, Klaus, and Xynthia, to update building vulnerability for all lines of business in every country, providing deeper insight into windstorm damage across the region.

Recent improvements in computing technology have enabled greater complexity of modeling and precision of meteorological forecasting models. Using 100 times more computing power than was previously available, windstorm simulations have been determined using an advanced Global Climate Model, which generates physically realistic events.

"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."

As a result of the revisions, the model now also includes 135 historical storm reconstructions from the past 40 years, helping to provide a more comprehensive basis for validating historical loss estimates.

Additionally, a new windstorm clustering methodology enables companies to assess the sensitivity of model results to multiple events in a given year, for example in years like 1990 and 1999 when a series of windstorms occurred.

This methodology enhances companies' understanding of tail risk and can better inform pricing for reinsurance treaties based on aggregate losses.

"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.

RMS added that it expects to see increases in the average annual loss in most regions, more closely matching historical experience. With the addition of small storms, which are not generally considered to be catastrophe events, the model now represents a more complete view of loss from the 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.