Aon sees increase in demand from US and ILS funds for weather forecasting models
Demand for secondary perils forecasts is growing, with a rise in interest from traditional reinsurers in the US and insurance-linked securities (ILS) funds, according to Chris Ewing, head of client management for Aon’s Impact Forecasting division.
“We’re seeing demand for secondary perils forecasts for Central and Eastern Europe and South Africa, and parts of Asia and Latin America.
“Over the past five years we’ve seen a shift to more interest in Europe and Europe windstorm, and for the US as well,” said Ewing.
As well as property there is interest in motor, he added.
“We have hail models where motor is a big component. There could be a car dealership or a rental company with a huge stock of vehicles in one place. If that gets hit by a hailstorm there could be huge amounts of damage, whereas maybe in the past the auto lines may not have used it.”
Aon’s division started with US hurricane and Europe windstorm response, which has been running for a couple of seasons to provide loss projection. In Asia models are under development for Japan and typhoons.
“For Hurricane Dorian in the US, we had our service running for about 60 clients to provide weather forecasts, taking them from the National Hurricane Center and running that through the models to provide forecasts directly to our clients. The idea is that they can get an accurate understanding of what the storm impact will be,” Ewing explained.
Aon’s Impact Forecasting division develops statutory models for the world covering US, Europe and other key territories with a team of about 90 people.
Ewing said the current forecasts for hailstorm or flood, for example, are “always built with the latest available weather patterns”, but looking to the future, there are more factors that the models need to account for.
“As well as climate there are things such as behavioural changes and mitigation that need to be taken into account. Building a model of a changing climate signal or view is a multi-part problem.
“There’s the temperature change itself and the impact that might have on frequency, but also behavioural change. If there’s a factory in a coastal location the question is: would they move? The models cater for the current climate view,” he explained.
Looking back at notable insured losses over the past 20 years, 1999 was a peak year for EU windstorm events: Windstorm Lothar totalled $9.3 billion; Windstorm Martin came in at $3.9 billion, and Windstorm Anatol totalled $3.4 billion. Total European windstorm insured losses for that year were $16.7 billion, while total economic losses were $27.5 billion.
In 2007 Windstorm Kyrill incurred insured losses of $6.9 billion, while Windstorm Klaus in 2009 totalled $4.1 billion. In 2010, insured losses from Windstorm Xynthia reached $3.6 billion. More recently, in 2019, insured losses from Windstorm Friederike were $2.1 billion.
