Risk Management Solutions, Inc. - U.S.A.
Since the early 1990s, the insurance and reinsurance industries have utilized natural catastrophe-modeling technologies to quantify, manage, and transfer risk. In a general sense natural catastrophe models share a common framework consisting of a set of synthetic events, a set of relationships between natural hazard severity and property damagability, and a method for quantifing the financial loss. Natural catastrophe models are valuable to these industries because insurers rarely have long periods of claims data. Further, these claims data include sources of loss unrelated to the natural phenomena (e.g., short-term supply and demand discontinuities in the wake of an event).
The development of a natural catastrophe model for hail differs from extratropical windstorms because a loss event often consists of multiple discrete sources of hazard, which are relatively small in geographic scope. The hailstorms that impacted the Munich area on 12 July 1984 are an example of such an event, where several distinct hailswaths were observed to yield a combined loss of near 1.75 billion EUR.
The framework of a hailstorm catastrophe model that has been developed for the United States insurance market will be presented. The use of varied climatological data sources in the production of a synthetic event set will be described. Specific emphasis will be on how this approach could be applied to Europe and what challenges would need to be overcome. Such a model, when completed, would provide a means to quantify where the 1984 Munich event lies on a European loss-severity curve.