New cyclone model hits Australia

Global risk modeling and analytics firm RMS has released Version 18 of its catastrophe risk management software for Australia, which now includes the latest data updates for the country’s earthquake and cyclone risk models.

RMS Managing Director, Australia and New Zealand, Dr Pierre Wiart said the Version 18 release includes new and updated capabilities to underwrite, drive growth and manage catastrophic risk for the Australian insurance and reinsurance market in which the firm provides critical regulatory support.

“The Version 18 release provides the latest modeling insights to drive growth across the varied markets of the Asia Pacific region, particularly in Australia, with the update of two key models – Australia Cyclone and Australia Earthquake,” Dr Wiart said.

“Using the latest science and innovative methodologies, Version 18 strengthens our clients’ analytical capabilities to support profitable portfolio growth in the Australian market, with an annual gross written property premium of over A$12 billion1,” he said.

Dr Wiart said it was important for the Australian market to understand the impact of recent cyclone events.

“In the last decade, Australia has experienced several tropical cyclone events that each caused over US$500 million in loss to the insurance and reinsurance industry,” Dr Wiart said.

“Such events include Cyclone Yasi in 2011, Cyclone Marcia in 2015, and most recently, Cyclone Debbie in 2017.

“These events, while catastrophic, provide new cyclone hazard data for Australia, which can improve understanding of the vulnerability of buildings from cyclone winds.

“In addition, the number of properties in Australia at risk from cyclones has grown rapidly, in terms of volume and values,” he said.

“Version 18 of the Australia Cyclone Model uses claims data shared by local industry partners, as well as engineering reports from cyclone events and over 10 years of new data from the Australian Bureau of Meteorology (BoM).

“Together these data improvements ensure the Version 18 release represents the most up-to-date view of building vulnerability and cyclone frequency, severity and risk in Australia,” Dr Wiart said.

’Version 18 of the RMS Australia Earthquake Model includes expanded earthquake risk modeling capabilities that will assist insurers, corporations, public agencies and financial markets to make more informed decisions.

“Australia is situated in a stable continental tectonic environment, on the Indo-Australian plate, which collides with neighbouring tectonic plates,” Dr Wiart said.

“As a result, although the earthquake risk in Australia is relatively low compared to other countries in the Asia Pacific region, Australia does experience significant seismicity, which can potentially lead to destructive earthquakes.

“This potential for damaging earthquakes was demonstrated by the 1989 Newcastle Earthquake, which caused just under A$1 billion in insured loss at the time of the event,” he said.

“While there have not been any significant earthquakes in Australia in the last few years, RMS has incorporated lessons learnt from other recent global events, including the 2010–2011 Canterbury Earthquakes in New Zealand.

“RMS has also considered the latest scientific developments proposed in the national seismic hazard assessment and the recently released site conditions data from Geoscience Australia, to update the RMS Australia Earthquake Model,” Dr Wiart said.

The Version 18 (V18) release updates all aspects of earthquake modeling in Australia, including the geocoding, source model, ground motion models, soil data, vulnerability, and building inventory.

In addition, V18 incorporates new capabilities for both the cyclone and earthquake models, including vulnerability functions for Industrial Facilities and Builders Risk, Marine Cargo and Specie risks, the explicit modeling of post-event loss amplification (PLA) and a new RMS Australia Industry Exposure Database and peril-specific Industry Loss Curves.

RMS Chief Risk Modeling Officer Dr Mohsen Rahnama said updates can take many years in development.

“It is timely that the Australian model updates come relatively shortly after RMS opened its Australia office in Sydney last year; and following on from the release of the New Zealand Earthquake HD model in 2016,” Dr Rahnama said.

“RMS has updated its models for the three key perils relevant to Australia and New Zealand solvency requirements and provides critical regulatory support to these markets.

“The Asia Pacific has always been important to us, and the inclusion of new models for the region, including Philippines Typhoon, India Flood and South Korea Earthquake should help enhance the opportunities for established operators and new entrants to better understand the potential for risk, and for growth, in these important markets,” he said.

“With the release of Version 18 we continue to deliver the high standard of accurate information and analysis that our clients know and expect from RMS,” Dr Rahnama said.