Cat models in demand in Asia with focus on typhoon, earthquake and flooding models, says AIR
In line with the growth of the re/insurance industry in the region, there is growing demand for cat models for Asia, Milan Simic, executive vice president and director of global business development for AIR, told SIRC Today.
“Ten or 20 years ago the level of sophistication of models for Asia was not as high as in those for the US and Europe,” Simic said.
“We have worked hard to correct that.”
There is particular demand in Asia-Pacific for typhoon, earthquake and flood models, while in the US there is growing demand for wildfire models, he said. In recent years, AIR’s coverage has spread from California to cover 13 US states.
Climate change has been a great focus of AIR’s research in recent years: it has a dedicated department to examine its impact, he added.
“When we create models, we look at the potential impact of climate change. Regulators are asking about the impact of climate change, putting the ball in the insurers’ and reinsurers’ court to quantify the potential impact,” he explained.
AIR’s analysis of insured losses compared with modelled losses over the last decade puts insured losses at $73 billion and modelled losses higher, at $90 billion. However, Simic noted, the last decade included a period of hurricane drought: there were no significant losses from 2004/2005 until 2017.
One climate change effect observed by AIR is that typhoons tend to move more slowly, but the wind intensity tends to be higher.
“Because they move more slowly, they are able to absorb more moisture from the oceans, which means they will be wetter than normal,” said Simic.
“In the North West Pacific there is a tendency for landfalls to move further north, meaning that Japan and Korea can potentially see more landfalls than South East China.”
He added that from a re/insurance point of view, climate change is an ever-developing picture.
“It is not going to realise itself in the next year there will not be a drastic impact within any one year, but in 10, 15, or 100 years.
“Re/insurers have to be prepared for that new norm and adjust pricing and all the other conditions they have to deal with, accordingly,” he concluded.
