Aon enhances severe convective storm modelling capabilities

Aon is working with Athenium Analytics to build enhanced modelling capabilities for severe convective storms, as insurers tackle growing losses associated with this peril.

While tropical cyclones remain the costliest peril for the insurance industry in the US, triggering the equivalent of £279bn in insured losses since 1990, severe convective storms are a close second at £254bn.

The US has already recorded 14 individual billion-dollar-insured SCS events through to September this year.

Aon and Athenium are working to plug data gaps that insurers need to accurately price, underwrite portfolios and purchase reinsurance as a means to rethink access to capital when navigating volatility from this peril.

Liz Henderson, senior managing director for Aon’s Reinsurance Solutions business, explained: “Insurers recognise that SCS is a challenging peril to understand as historical data that has traditionally been relied upon tends to be biased towards population centers, hence underrepresenting the hazard in rural or growing communities. In addition, fraudulent claims can lead to an inflation of losses, making it difficult to quantify vulnerability. With these challenges, current tools often underestimate the true cost of the SCS peril. Our collaboration with Athenium Analytics will enable insurers to make more informed business decisions when managing this risk.”

Siamak Daneshvaran, global head of research and development for Aon’s Impact Forecasting team, added: “The collaboration between our teams will build upon synergies across hazard, technology and data to boost insurers’ understanding of severe convective storms. The better the historical data, the more robust the stochastic event set will be to create realistic average annual loss and probability curves to support underwriting and reinsurance buying.”

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