© stanhope by hufton + crow iis 46 th annual seminar, madrid, june 2010 rowan douglas ceo global...
TRANSCRIPT
© Stanhope by Hufton + Crow
IIS 46th Annual Seminar, Madrid, June 2010
Rowan Douglas
CEO Global Analytics, Willis Re
Chairman, Willis Research Network
Managing Extremes: Forecasting Climate and Capital in a Modelled World
Managing Extremes in the Modelled World
Return Period
Loss
Am
ount
Catastrophe model – exceedence probability
output
3
Natural Catastrophe and Insurer Security
Example insurer: Capital requirement gross of reinsurance under EU Solvency 2 QIS4
UnderwritingMarketDefaultOperational
77%20%0%3%
SCR 362,306,041
Underwriting 329,678,231Catastrophe 300,000,000
Market 69,468,900Default 0Operational 8,788,400
Risk Based Capital Regulation via Modeling Extremes
4
Models Create & Consume Capital
Base Secondary Modifier
Post 07 UK Flood
SCR 362,306,050 304,898,030 481,258,0800.0% -15.8% 32.8%
Underwriting 329,678,240 270,984,530 450,279,460Catastrophe 300,000,000 234,000,000 429,000,000
Capital Impact -57,408,020 118,952,030all figures in £
Insurer Responses: - Master of Models, not servant - Science to reduce uncertainty
Impact on Capital
0
10
20
30
40
50
60
Base Secondary Modifier RMS Post UK Flood event
Gro
ss S
CR
/ m
illi
on
s
5
Embracing Public Science
The Rise of the Supermodel
• Historical data is no longer sufficient
• The industry is entering a new era of extreme climate & weather risk modelling
• Simulation of planet’s climate system using high resolutions Global Climate Models
• Improved evaluation of current risk levels
• Global & regional teleconnections – diversification benefits
Catastrophe Management is about Time and Space
Dispersion,all storms (3-monthly storm transit counts)
Dispersion, most intense storms (exceedance probability=20%)
Operational Climate Forecasting
Building Stock Inventories (Quickbird/Cambridge)
Global climate monitoring (NCEO) Flood monitoring (Infoterra)
The Second Space Age
TerraSAR X (DLR) Sentinel – 3 (ESA) Cloudsat - NASA
Haiti Earthquake/AlOS SAR (JAXA) Earthquake damage assessment (Cambridge)
Global Earthquake Model
Redefining Sustainability, Financial Security and Repositioning Insurance• Sustainability = avoiding or managing undesirable
extremes within tolerable parameters
• Unifying Financial Security, Sustainability and Poverty Reduction under a common philosophy and framework
• Poverty reduction interventions should perhaps be focussed on helping communities avoid or manage intolerable impacts of extremes
• As re/insurance enables society to understand, manage and share extreme risks at global and local scales via public and private mechanisms it is being repositioned at the centre of solutions of sustainability