Aon has announced an expansion of its collaboration with Athenium Analytics to build enhanced modeling capabilities for severe convective storms (SCS).
While tropical cyclones remain the costliest peril for the insurance industry in the United States, triggering $362 billion in insured losses since 1990, severe convective storms are a close second at $330 billion, according to the broker.
With the US already recording at least 14 individual billion-dollar-insured SCS events through September of this year—including the Midwest Derecho on August 10 and several major tornadoes and hailstorms—Aon said it is more important than ever for insurers to enhance their analytical capabilities to better understand their impact from these costly storms.
The collaboration with Athenium Analytics will it is claimed fill SCS data gaps that insurers need to accurately price, underwrite portfolios and purchase reinsurance as a means to rethink access to capital when navigating volatility from this peril.
As such, the companies will provide an updated catalog of historical event footprints for US SCS, including its sub-perils of hail, straight-line winds and tornadoes.
This will be available within Aon’s Impact Forecasting Severe Convective Storm catastrophe model to analyse specific scenarios, such as a repeat of April 2011’s Super Outbreak in the U.S., and present opportunities for improved underwriting and aggregation tools.
Also available will be a new hypothetical (stochastic) event set for Impact Forecasting’s updated SCS model to consider plausible events that have not recently occurred.
Liz Henderson, senior managing director for Aon’s Reinsurance Solutions business, explained: “Insurers recognize that SCS is a challenging peril to understand as historical data that has traditionally been relied upon tends to be biased towards population centers, hence underrepresenting the hazard in rural or growing communities.”
“In addition, fraudulent claims can lead to an inflation of losses, making it difficult to quantify vulnerability. With these challenges, current tools often underestimate the true cost of the SCS peril. Our collaboration with Athenium Analytics will enable insurers to make more informed business decisions when managing this risk.”