Modelling creates opportunities: AIR

As excess capital flows into the market, catastrophe risk modelling firms can provide solutions that facilitate the expansion of the market, making it possible for excess capital to be deployed in addressing new, emerging and previously unmodelled risks or in geographical areas where insurance penetration is low.

That is the view of Jayanta Guin, executive vice president of AIR Worldwide, speaking about the impending launch of AIR Worldwide’s new US inland flood model, which will hit the market later this year.

“As a modelling firm we are able to provide the necessary tools to help broaden the market. Our work in US flood fits into that category – US flood is a peril that has been there and known for a while, but now that there is a modelling solution, companies will feel more comfortable about broadening coverage and broadening the availability of policies – and that will in itself provide opportunities to expand the market,” he said.

“This model is unique; it covers a very large area, with 2.2 million km of rivers being modelled with great precision.”

He added that the model incorporates realistic modelling of rainfall, making it possible to model everything from very short flash floods to longer lasting, large-scale floods.

“There is so much talk at present about alternative capital and insurance-linked securities (ILS) – and new, innovative products can be developed now that the flood model is available. There is real excitement and anticipation about this.”

AIR Worldwide’s main software platform, Touchstone, was released in 2013 and has been widely accepted by customers all over the world, said Guin.

“They are seeing a lot of advantages – speed, ease of analysis, and the provision of a lot more valuable information to improve the risk insights. We are thrilled about how it has been accepted.”

Version 2 of the software, released in July this year, has the ability to analyse catastrophe risk and non-catastrophe risk in one single analysis.

“This is a new capability, and one that we believe is unique,” said Guin. “Previously companies had to go to other tools and other solutions in order to get the non- catastrophe components. Customers have welcomed the efficiency that has come from integrating it all into one single platform.”

He said that AIR is now working on facilitating the industry’s creation of further new, innovative products by working on creating life models and cyber models.