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Over $90 million in storm damage in western provinces, more than 200 weather-related claims for one insurer after a series of tornadoes, a bill of $20 million for a public insurer because of a hailstorm – the list of costs tied to natural catastrophes in Canada keeps growing as storms, fires, and flooding wreak havoc from coast to coast.
The scales are being balanced, however, by catastrophe modelling software companies, who are ramping up their efforts to pinpoint exposures and predict losses. On August 01, AIR Worldwide released its new reinsurance catastrophe modelling platform, Touchstone Re, to help reinsurers estimate the loss potential of their contracts and portfolios, industry loss warranties, and insurance-linked securities, according to a press release.
Over the last 20 years, the cat-modelling industry has made serious headway in the kind of insight it can provide, in AIR’s case, to 34 of the top 40 global non-life reinsurers and eight of the top 10 global non-life insurers who partner with the company.
“The granularity of exposure data being shared within the reinsurance market is becoming increasingly more detailed. If we’d spoken 10, 15 years ago, many parts of the model would’ve only been able to provide aggregate level exposure data for modelling purposes,” said Colette Karakashian, senior product manager at AIR Worldwide. “What we’re seeing now is that there is definitely a trend towards more detailed data being available within regions that traditionally haven’t had those available, and that is allowing people to more accurately model the risk.”
Instead of just knowing that there’s an exposure in a particular region, the technology can now pinpoint streets where those risks are located, and while that feature is mainly available in advanced markets, other parts of the world are likewise being opened up for this kind of detailed data collection.
“Behind the scenes, we have a view of the industry from an exposure perspective by geography and line of business, and we refer to this at AR as market share analytics capability, and what that lets us do is have an industry-level view of loss potential by geography and line of business,” Karakashian told Insurance Business. “We have an idea of what the exposure is within the affected geographies and the affected lines of businesses. We also have an idea of the take-up rates within the insurance market, so an idea of how much insurance is actually being written in each of these geographies and lines of business.”
Then, Touchstone Re can calculate at an industry-level the potential loss from a real-time event – say, an earthquake – because of the application of market share analytics that drive the model’s calculations and the software’s ability to assume detailed losses, all in a user-friendly interface.
“I like to think of it as a toolbox. There are lots of different ways that users can create and define individual layers of a complete complex reinsurance structure and then they can define exactly how losses flow from one layer to another in a really flexible way,” said Karakashian.
Touchstone Re evolved from AIR’s CATRADER software and Touchstone solution, which performs advanced analytics that companies use to determine their own risks.
“CATRADER is extensively in the reinsurance market for pricing and portfolio management, but we really wanted to bring it together with Touchstone in order to offer a single, integrated modelling platform for our clients,” explained Karakashian. “We know that reinsurers are looking to deeper analytics, more transparency around catastrophe models, and the ability to run analytics faster, so bringing Touchstone Re will help offer all those things to our clients.”
