1 / 73

Catastrophe Modeling

Catastrophe Modeling. Jim Maher, FCAS MAAA Chief Risk Officer Platinum Re US. Basic Elements of Cat Models. Hazard Module Engineering Module (aka Vulnerability) Insurance (aka Financial) Module Event Set (and Year Set). Hazard Module. Seismology Meteorology Terrorism

york
Download Presentation

Catastrophe Modeling

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Catastrophe Modeling Jim Maher, FCAS MAAA Chief Risk Officer Platinum Re US CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  2. Basic Elements of Cat Models • Hazard Module • Engineering Module (aka Vulnerability) • Insurance (aka Financial) Module • Event Set (and Year Set) CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  3. Hazard Module • Seismology • Meteorology • Terrorism • Non random frequency • Non random severity CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  4. Non-modeled perils • Tsunami • Meteor strike • Est. RP of 1,000 years for 10 megaton event • Most recent Siberia (1908) • River Flood • Wildfire • Winterstorm CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  5. Non-modeled coverages • Life/Health • Personal Accident • Group Life • Disability • Marine • Yachts • Offshore Oil Rigs • Cargo CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  6. Earthquake • Major Types of Earthquake • Location of Earthquake Hazard • Major Historical US Earthquakes • Recent US Earthquakes • Vulnerability and Financial Models • Earthquake prediction (?) CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  7. Major Types of Earthquakes • Strike-Slip • Rock on one side of fault slides horizontally • San Andreas Fault • Dip-Slip (subduction) • Fault is at an angle to the surface of the earth • Movement of the rock is up or down • Great Kanto Earthquake (Japan 1923) CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  8. Location of Earthquakes • Plate Boundaries • 90% of worlds earthquakes occur here • Seven Major Crustal Plates on the Earth • Rocks usually weaker, yield more to stress than Examples: California, Japan, etc. • Ring of Fire • Intra-plate Earthquakes • New Madrid (1812) • Newcastle, Australia (1989) • Charleston (1886) CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  9. Plate Boundaries & “Ring of Fire” CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  10. CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  11. Modified Mercalli Scale • IV Felt by many indoors but by few outdoors. Moderate • V Felt by almost all. Many awakened. Unstable objects moved. • VI Felt by all. Heavy objects moved. Alarm. Strong. • VII General alarm. Weak buildings considerably damaged. Very strong. • VIII Damage general except in proofed buildings. Heavy objects overturned. CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  12. Modified Mercalli ctd. • IX Buildings shifted from foundations, collapse, ground cracks. Highly destructive. • X Masonry buildings destroyed, rails bent, serious ground fissures. Devastating. • XI Few if any structures left standing. Bridges down. Rails twisted. Catastrophic. • XII Damage total. Vibrations distort vision. Objects thrown in air. Major catastrophe. CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  13. Major Historical US Quakes • San Francisco (1906) • Magnitude 7.8, 3000 deaths • Significant fire following element • Charleston (1886) • Magnitude 7.3, 100 deaths • New Madrid (1811/12) • 12/16/1811 Northeast Arkansas • 1/23/1812 & 2/7/1812 New Madrid, Missouri • Estimated Magnitude 8.0 • Destroyed New Madrid, severe damage in St. Louis, rang church bells in Boston CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  14. CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  15. Recent US Earthquakes • Loma Prieta (1989) • Northridge (1994) • Nisqually/ (Seattle) (2001) CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  16. Loma Prieta (1989) • Magnitude 6.9 on San Andreas Fault • Largest since 1906 earthquake • 63 deaths, 3,757 injuries, $6 BN economic damage, $1.0 BN insured damage • Severe property damage in Oakland and San Francisco • Collapse of Highways, viaducts CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  17. Loma Prieta ctd. • Liquefaction • San Francisco’s Marina district • loosely consolidated, water saturated soils. • Loosely consolidated soils tend to amplify shaking and increase structural damage. • Water saturated soils compound the problem due to their susceptibility to liquefaction and corresponding loss of bearing strength. • Unreinforced masonry construction • Engineered buildings performed well CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  18. Northridge (1994) • Magnitude 6.8 earthquake • Occurred on previously unknown fault • 60 killed, 7,000 injured, 20,000 homeless, 40,000 buildings damaged • $15 BN insured damage, $44 BN economic • Fires caused damage in San Fernando Valley, Malibu, Venice • Liquefaction at Simi Valley CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  19. CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  20. Northridge-PCS Estimates CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  21. Nisqually/(Seattle) (2001) • Magnitude 6.8, 400 people injured • Major damage in Seattle-Tacoma area • Insured Damage $305 Million • Max. intensity VIII in Pioneer Square area • Landslides in the Tacoma area • Liquefaction and sand blows CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  22. Earthquake vulnerability factors • Building construction • Unreinforced masonry vs. seismic designed • Building height • Taller buildings vulnerable to long-period waves • Soft story (hotel lobby) increases vulnerability • Building location • Soil type is critical • Fire following losses can be very significant CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  23. Financial model factors • CEA mini-policy • Earthquake sublimits on commercial • Per policy • Per location • Regional sublimits (e.g. CA only) • Interlocking clause • Reduces event loss across multiple treaty years • Hard to model CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  24. Differences between models • Detailed vs. Aggregate • Detailed models better capture these vulnerability and financial considerations • Fire Following • Significant difference in modelers • New Madrid • Significant difference in return period CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  25. Earthquake prediction • Earthquakes not a Poisson process • Poisson implies inter-arrival times are exponentially distributed (memory-less) • 1999 Izmit (Turkey) Earthquake • Increased risk for a quake in Istanbul • San Andreas Fault • Is an earthquake due? Where on fault? CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  26. CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  27. Izmit Quake ctd. • 60% chance of Istanbul earthquake in next 30 years - Thomas Parsons, USGS • Researchers took into account the stress transfer from a magnitude 7.4 earthquake in Izmit, Turkey in August 1999. CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  28. San Andreas Fault • Over the past 1,500 years large earthquakes have occurred at about 150-year intervals on the southern San Andreas fault. • As the last large earthquake on the southern San Andreas occurred in 1857, that section of the fault is considered a likely location for an earthquake within the next few decades • The San Francisco Bay area has a slightly lower potential for a great earthquake, as less than 100 years have passed since the great 1906 earthquake CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  29. Cat Models and Earthquake Pred. • At least one cat modeling firm has variable earthquake rate (changes with calendar date) • Annual model updates allow for changing earthquake rate with time. CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  30. Hurricanes • Meteorology of Hurricanes • Frequency of Hurricanes by category • Recent Hurricane Activity • Hurricane prediction • Vulnerability and Financial Models CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  31. Meteorology of Hurricanes • Occur in both Northern and Southern Hemispheres • Don’t occur on the equator • Factor in the 2004 Tsunami tragedy • Coriolis Force • spin clockwise in southern hemisphere • spin counter-clockwise in northern hemisphere • Need warm sea surface temperatures • Always travel from east to west CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  32. CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  33. Safir-Simpson Scale CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  34. Atlantic Basin Hurricanes 2001 - 2006 6 15.3 8.0 CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  35. US Landfalling Hurricanes CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  36. Average & Recent Hurricane Activity • To sum up: Average Hurricane numbers per year: • Cat Modeling Firms response: • Alternate versions of their models • Short Term vs. Long Term view CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  37. Major Storms: 2004-05 CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  38. 2002 Season CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  39. 2003 Season 2003 CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  40. 2004 Season 2004 CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  41. 2005 Season CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  42. 2006 Season CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  43. 2004 Hurricanes cost CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  44. 2005 Hurricanes cost CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  45. Hurricane Prediction Actual 15 CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  46. Hurricane Prediction, ctd. CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  47. Hurricane Prediction 2007 CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  48. Vulnerability model factors • Construction • Concrete bunkers vs. mobile homes • Location • Properties near ocean very vulnerable to storm surge • Secondary modifiers • E.g. Roof tie downs CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  49. Financial model factors • percentage deductibles can be very significant • New season deductible in FL • What is a risk? • Issue for per-risk treaties • For hurricanes, widely dispersed buildings on one policy often considered one “risk” • E.g. school district CAS 2007 Reinsurance Boot Camp on Pricing Techniques

  50. Differences between models • Detailed vs. Aggregate models • Location (distance to coast) is critical • Need detailed model to properly assess • Northeast Hurricane • Significant difference between modelers • Caribbean clash • Not all modelers facilitate this analysis CAS 2007 Reinsurance Boot Camp on Pricing Techniques

More Related