Sompo Canopius and RMS to release first marine cat model
Written by staff reporter
Sompo Canopius and catastrophe modelling firm Risk Management Solutions (RMS) have built the world’s first marine cat model, addressing limitations to the industry’s ability to effectively quantify man-made and natural catastrophe risk to marine classes.
Sompo Canopius partnered with RMS and six other re/insurers to compile data, build and calibrate models to assess vulnerability of cargo and specie more realistically, particularly with respect to product classification, storage and packaging. Significant global exposure accumulations have been studied in detail to improve representation of these key risks with respect to natural and man-made perils.
Marek Shafer, head of catastrophe management at Sompo Canopius, commented, “Significant marine losses such as the 2011 Tohoku earthquake, 2012 Hurricane Sandy and the 2015 Tianjin explosion have improved the understanding of the link between property and marine lines of business. They have also reinforced Sompo Canopius’s belief that the approach to catastrophe management should be holistic across our group. The practice of square pegging marine exposure into the round holes of property catastrophe risk models is now recognised as inappropriate. A new approach is needed to align these correlated classes and our collaboration with RMS represents a key step on this journey.”
Ahead of the launch of the new model in May, RMS has published a new report examining the current state of cargo modelling in the marine market, and providing a new cargo-specific approach to the assessment of vulnerability and port accumulation.
In the last four years, records have been broken twice for total insured marine losses – first for Hurricane Sandy in 2012 at USS$3 billion, then the explosions at Tianjin last year, reported to be US$5-6 billion. While these two events have underscored the need for the industry to a develop a much deeper understanding of the risks, until now re/insurers have lacked the tools to estimate their port accumulations, evaluate cargo protection measures, and measure the performance of cargo exposed to a catastrophic event such as a hurricane, storm surge, or earthquake.
“Global sea-based trade tonnage nearly quadrupled between 1970 and 2010,” explains Chris Folkman, director, product management at RMS. “With higher cargo volumes, larger ships, growing ports, and increasingly efficient terminal operations, exposures at risk are a growing concern. Re/insurers need to have a better grasp of their cargo catastrophe risk and how it correlates with other lines of business. They simply cannot continue to use the outdated methods currently available to them.”
The report 'Marine Cargo Catastrophe Modeling: Navigating the Challenges, Charting the Opportunities' can be downloaded here.