Aon Benfield, the global reinsurance intermediary and capital advisor of Aon plc, has launched a flood model for Thailand to help global insurers gain a better understanding of their exposures in this growing market.
Thailand is one of the most flood-prone countries in the world but had not experienced any major flood insurance losses before 2011. The unprecedented 2011 loss, estimated to be in excess of USD15 billion, was due to a rapidly changing land-use pattern, record rainfall in the northern region and seasonal high tides in the Gulf of Thailand, in addition to man-made factors in managing the floods.
In response, Aon Benfield invested in a fully probabilistic Thailand flood catastrophe model, developed by Impact Forecasting – its catastrophe model development centre of excellence.
Key features include:
- Improved understanding of the key drivers of flood risk in Thailand
- Ability to make more informed decisions on reinsurance purchase and pricing
- Identification of the amount of capital needed to satisfy regulatory and rating agency requirements
- Modelling for residential, commercial and industrial lines of business
- Damage functions based on 2011 claims data and international experience
Malcolm Steingold, Chief Executive Officer, Asia Pacific for Aon Benfield, said: "Aon Benfield has provided vital support for insurers and reinsurers in Thailand and the wider Asia region by securing renewal of crucial reinsurance capacity in the aftermath of the largest ever catastrophe loss in Asia outside Japan. As we move towards the next reinsurance renewals, the new model – based on numerous site inspections – will help us to better assess the vulnerability of risk concentrations to natural perils and to address the issue of unmodelled perils.”
Adityam Krovvidi, head of Impact Forecasting, Asia Pacific, added: “Flood is one of the most difficult perils to model due to complex geophysical phenomena, ever increasing human interventions and potential climate variability impacts. The record flood insurance loss in Thailand provides a learning opportunity to further investigate the potential impact of this hazard. This in turn has enabled us to create a solution that lies in a rigorous analytical and scientific approach, while taking into account the location of exposures and flood defences.”
The Thailand flood model is integrated in ELEMENTS – Impact Forecasting's proprietary loss calculation platform – which enables insurers to more easily customise catastrophe models and gives access to 30 catastrophe models spanning over 20 territories and six key perils.