Aon Benfield’s Impact Forecasting has developed catastrophe models for Malaysia and Jakarta floods to help insurers and reinsurers better underwrite and manage their exposures in Asia.
The new models were launched at the Singapore International Reinsurance Conference.
On average, Malaysia experiences a major flood once every three years though major insurance losses have been less frequent. Due to increased exposure concentrations and evolving urban environments, these historical events are poor indicators of future loss potential.
According to Impact Forecasting, large accumulations from high value commercial and industrial properties in the floor plains. The data from the field studies was used as the basis for the new model.
In Asian mega cities, it is a challenge to accurately assess insured flood risk due to large concentrations of risk. Jakarta demonstrated the need for a flood model to fully understand possibly financial implications.
Impact Forecasting worked with the Jakarta City government to take into account land subsidence and recent mitigation works when developing the probabilistic tool.
Both models have the ability to analyse portfolios with residential, commercial and industrial estate lines of business and are available on the elements loss calculation platform. This enables insurers to achieve more accurate results by customising the components based on loss history, according to Impact Forecasting.
Adityam Krovvidi, head of Impact Forecasting in Asia, said: “Ever since the Thai floods of 2011, the reinsurance and insurance industry has been keen to grasp the implications of this peril throughout the Asia region.”
“Now, coupled with other factors such as increased urbanisation and detariffication in Malaysia, we have addressed these challenges with models that can fulfill regulatory and rating agency requirements—in addition to the more traditional use of driving accurate reinsurance purchase.”
Brad Weir, head of Aon Benfield Analytics for Asia, added: “Malaysia’s costliest economic loss of $580 million came from the December 2014 flood while an event in January 2013 left Jakarta with economic damages around $3.4 billion. Having a robust solution to understand and remove the uncertainty of its potential is crucial in supporting risk management decisions.”
