Willis Re has launched a new Hail Catastrophe Risk Model which quantifies the risk from damaging hail events across South Africa. Developed in collaboration with Willis Research Network partners at NASA’s Langley Research Centre and the Karlsruhe Institute of Technology (KIT) in Germany, the model delivers a robust view of hail risk for the (re)insurance market.
The model, which is greatly more sophisticated than its predecessor, features a comprehensive stochastic hail catalogue, developed by hail specialists at KIT using NASA satellite-derived data. Applying the latest NASA hail detection algorithms, KIT mapped the distribution of observed frequency and severity. Events and their attributes were then simulated for a 25,000-year period to generate a comprehensive catalogue of hail events, with their footprints and parameter distributions reflecting observations in South Africa.
The main applications of the Hail Catastrophe Risk Model outputs include:
- Pricing reinsurance contract layers for purchasing protection in the local and international reinsurance markets
- Independent sense-check for assessing capital adequacy and responding to regulatory solvency requirements
- Portfolio management and optimisation
Hail losses are relatively frequent in South Africa. Seven of the top ten insured natural catastrophe events since the 1970s in the country are associated with hail, with upwards of 45% of the total value of insured Motor and Property claims from natural perils caused by hail damage. This frequency coupled with the potential for severe loss accumulations – as demonstrated by the catastrophic November 2013 losses in Pretoria – can also threaten insurers’ earnings potential. With this kind of prevalent risk at hand, a firm understanding of the potential financial impacts of a devastating 50-year hailstorm or the expected loss over the next ten years is critical.
Natalie van de Coolwijk, Chief Executive Officer for Willis Re South Africa and Head of Middle East & Africa, Willis Re, said: “The updated hail model is an important addition to our toolkit and reaffirms our market leading position with respect to catastrophe modelling capabilities for the Middle East & Africa region. It will serve our clients in assessing their risk management needs for this prevalent peril and allow for a technical view in determining their risk appetite and mitigation measures.”
Marie-Kristina Thomson, head of catastrophe analytics for EMEA West-South at Willis Re, said: “We are excited to launch our new hail risk model, which will provide effective portfolio hail loss metrics enabling Willis Re clients to derive actionable insights. In collaboration with our Willis Research Network partners, we have developed a robust view of hail risk across our territories in Europe and now South Africa, underpinned by the latest available data and detection techniques, empowering our clients to make confident risk transfer decisions for hail-sensitive portfolios.”
Kristopher Bedka, Research Scientist at NASA’s Langley Research Centre, said: “The NASA Applied Science Disasters Program, the sponsor of this NASA collaboration with Willis Re, KIT and a variety of international partners, promotes the use of satellite observations to reduce risk and promote resilience from a variety of natural disasters including severe hailstorms on local and global scales. NASA satellite-derived products developed within this project are providing unique insights into severe storm climatologies over South Africa and other regions around the globe that have not been extensively observed by ground-based weather radar networks. We are excited to see that these data are providing significant contributions to risk assessment and development of this Catastrophe Model.”
Heinz Jürgen Punge, Willis Research Fellow at the Karlsruhe Institute of Technology, said: “At KIT, we are committed to transform the advances of science into innovations that benefit the society. Within the Center for Disaster Management and Risk Reduction Technology (CEDIM), we investigate the occurrence and mitigation of natural hazards such as hailstorms. It is surprising how many aspects of hail are still poorly understood. Our longstanding partnership within the Willis Research Network is a prime example how the combination of research and business perspectives can yield effective commercial solutions and – at the same time – generate new scientific knowledge.”