Artemis Live - Insurance-linked securities (ILS), catastrophe bonds (cat bonds), reinsurance 64: What RMS' new hurricane model update means for insurance linked securities (ILS) - May 2021
Jun 4, 2021
34:51
For our latest Artemis Live interview we were joined by two Jeff Waters and Ben Brookes from catastrophe risk modeller RMS, to discuss the latest update to the RMS North Atlantic hurricane model and how the insurance-linked securities (ILS) market should think about this evolution in modelling hurricane risk.
RMS has recently launched an updated version of its North Atlantic hurricane risk model, with Version 21 containing some changes that are important for reinsurance and insurance-linked securities (ILS) market participants to understand, not least for the investor side of ILS and catastrophe bonds.
Jeff Waters, Meteorologist and Senior Product Manager at RMS and Ben Brookes, VP, Consulting Services at RMS joined us for the discussion.
With the 2021 Atlantic hurricane season now upon us, their explanation of the updates to the hurricane model and how ILS fund managers and investors should think about this, is valuable preparation for the storm season ahead.
Waters explained why the updates are important, “With Version 21 of our Atlantic hurricane models, we really continued to evolve the science of hurricane risk modeling.
“Over the years we’ve introduced various enhancement, such as multiple views of event frequencies, a very comprehensive storm surge modelling framework. All those key components remain, we’ve just enhanced them with the latest scientific understanding of the hurricane risk landscape. “A lot of that in Version 21 is informed by new data and learnings from recent impactful seasons, including $6 billion in new claims data.”
Brookes discussed at a high-level how capital market investors and those in the ILS market, such as fund managers and collateralized reinsurance players, should think about the updated model.
“In Version 21, our reference view of risk generally yields fairly small changes for ILS, versus the prior version. We’ve made some tweaks to the sets of hurricane rates that we have based on the data from the last couple of seasons, and those changes are relatively small overall,” Brookes said. Continuing to explain, “We’re also updating our industry exposure database as part of Version 21. The changes for that again are relatively small to bring the exposure in line with the latest growth trends. So the changes in the baseline views, if you like, are relatively muted.
“I think what’s more interesting is the impact and how we’re able to inform understanding of key uncertainties. I expect fund managers might want to think about how they’re pricing risk if the roof replacement rules are strictly followed, because those can have a fairly meaningful impact on loss.”
RMS has recently launched an updated version of its North Atlantic hurricane risk model, with Version 21 containing some changes that are important for reinsurance and insurance-linked securities (ILS) market participants to understand, not least for the investor side of ILS and catastrophe bonds.
Jeff Waters, Meteorologist and Senior Product Manager at RMS and Ben Brookes, VP, Consulting Services at RMS joined us for the discussion.
With the 2021 Atlantic hurricane season now upon us, their explanation of the updates to the hurricane model and how ILS fund managers and investors should think about this, is valuable preparation for the storm season ahead.
Waters explained why the updates are important, “With Version 21 of our Atlantic hurricane models, we really continued to evolve the science of hurricane risk modeling.
“Over the years we’ve introduced various enhancement, such as multiple views of event frequencies, a very comprehensive storm surge modelling framework. All those key components remain, we’ve just enhanced them with the latest scientific understanding of the hurricane risk landscape. “A lot of that in Version 21 is informed by new data and learnings from recent impactful seasons, including $6 billion in new claims data.”
Brookes discussed at a high-level how capital market investors and those in the ILS market, such as fund managers and collateralized reinsurance players, should think about the updated model.
“In Version 21, our reference view of risk generally yields fairly small changes for ILS, versus the prior version. We’ve made some tweaks to the sets of hurricane rates that we have based on the data from the last couple of seasons, and those changes are relatively small overall,” Brookes said. Continuing to explain, “We’re also updating our industry exposure database as part of Version 21. The changes for that again are relatively small to bring the exposure in line with the latest growth trends. So the changes in the baseline views, if you like, are relatively muted.
“I think what’s more interesting is the impact and how we’re able to inform understanding of key uncertainties. I expect fund managers might want to think about how they’re pricing risk if the roof replacement rules are strictly followed, because those can have a fairly meaningful impact on loss.”