Aon launches enhanced hurricane model amid $1.1 trillion in catastrophe damage

Aon launches enhanced hurricane model amid $1.1 trillion in catastrophe damage | Insurance Business New Zealand

Reinsurance

Aon launches enhanced hurricane model amid $1.1 trillion in catastrophe damage

New model features real-time updates, aiding reinsurance industry in managing storm risks

Reinsurance

By
Kenneth Araullo

US hurricanes have caused $1.1 trillion in economic damage and nearly $520 billion in insured losses since the start of the 21st century, positioning these storms as one of the world’s most significant natural hazards. The combination of severe weather systems and highly exposed assets in the United States makes accurate hurricane modeling essential for the reinsurance industry.

In response, Aon Reinsurance Solutions has introduced Impact Forecasting’s US Hurricane v3.0 model, which features significant enhancements, including a new event set, improved hazard and vulnerability components, and expanded occupancy classes and modifiers for defining exposure.

Aon Reinsurance Solutions emphasized that the updated model incorporates methodologies consistent with those used in its Atlantic Tropical Cyclone—Wind (FCHLPM) v2.0 model. This model is approved by the Florida Commission on Hurricane Loss Projection Methodology for residential rate filings with the Office of Insurance Regulation.

The US Hurricane v3.0 model also allows for experimental event sets, such as variations of the Great New England Hurricane of 1938, and deterministic “what-if” scenarios across the coast.

The enhanced model leverages Impact Forecasting’s Automated Event Response (AER) service, which provides real-time updates and modeled loss performance forecasts when storms occur in the North Atlantic basin. Aon Reinsurance Solutions notes that this feature is crucial for clients needing timely data during hurricane events.

One of the key innovations in the US Hurricane v3.0 model is its adjusted-rate view, developed in collaboration with Columbia University. This feature captures shifts in the occurrence of tropical cyclones in the Atlantic Basin that may result from climate change. The model includes a 200,000-year stochastic event set with over 65,000 simulated hurricanes, offering a comprehensive representation of historical hazards across the model’s domain.

Aon Reinsurance Solutions also highlights the use of the ELEMENTS platform, an open, multi-vendor modeling platform that allows customization to align with a client’s specific view of risk. This flexibility is designed to help clients better understand and manage their exposure to US hurricane risks.

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