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Accessing data in real-time to assess and manage an insurance carrier’s potential liabilities from a loss event remains the holy grail for exposure management teams and is high on a business’ overall wish list

A recent PwC Pulse Survey of U.S. risk management leaders found that risk executives are increasingly taking advantage of “tech solutions for real-time and automated processes, including dynamic risk monitoring (30 percent), new risk management tech solutions (25 percent), data analytics (24 percent) [and] integrated risk management tools on a single platform (19 percent)”.

PwC suggested that as part of an organization’s wider digital and business transformation process, risk management teams should therefore: “use technologies that work together, draw on common data sources, build enterprise-wide analytics and define common sets of metrics.”

Separately, Deloitte’s 2021 third-party risk management (TPRM) survey found that 53 percent of respondents across a range of industry sectors wanted to improve real-time information, risk metrics and reporting in their organizations. With the pandemic providing the unlikely backdrop for driving innovation across the business world, the Deloitte survey explained the statistic with the suggestion that one impact of COVID-19 “has been a greater need for real-time continuous assessment and alerts, rather than traditional point-in-time third-party assessment.”

Event Forecasting and Response with HWind and ExposureIQ

Natural catastrophe events are a risk analytics flash point. And while growing board-level awareness of the importance of real-time reporting might seem like a positive, without marrying the data with the right tools to gather and process that data, together with a more integrated approach to risk management and modeling functions, the pain points for exposure managers on the event frontline, are unlikely to be relieved.

RMS® ExposureIQ™ is an exposure management application available on the cloud-based platform RMS® Risk Intelligence™, which enables clients to centralize exposure data, process it, write direct reports and then run deterministic scenarios to quickly and accurately assess their exposure.

When an event is threatening or impacts risks, an exposure management team needs to rapidly process the available data to work out their overall exposure and the likely effect on insured assets. The integration of event response data such as HWind into the ExposureIQ application is where the acquisition of this hazard data really starts to make a difference.

The 2021 North Atlantic hurricane season, for example, is well upon us. It has already proved eventful, and access to regular, real-time data is relied upon as a crucial part of event response to tropical cyclones. With reliable event response analytics, updated in real-time, businesses can get fully prepared and ensure solvency through additional reinsurance cover, more accurately reserve funds and confidently communicate risk to all stakeholders.

The National Oceanic and Atmospheric Administration’s (NOAA) National Hurricane Center (NHC) has long been viewed as a valuable resource for forecasts on the expected track and severity of hurricanes.

However, according to Callum Higgins, product manager, global climate, at RMS, “There are some limitations with what you get [from the NHC]. Forecasts lack detailed insights into the spatial variability of hazard severity and while uncertainty is accounted for, this is based on historical data rather than the forecast uncertainty specific to the storm. Hurricane Henri in August is a good example of this. While the ultimate landfall location fell outside the NHC ‘cone of uncertainty’ four days in advance of landfall, given the large model uncertainty in the track for Henri, HWind forecasts were able to account for this possibility.”

Introducing HWind

RMS HWind provides observation-based tropical cyclone data for both real-time and historical events and was originally developed as a data service for the NHC by renowned meteorologist Dr. Mark Powell. It combines the widest set observations for a particular storm in order to create the most accurate representation of its wind field.

Since RMS acquired HWind in 2015, it has continually evolved as a solution that can be leveraged more easily by insurers to benefit individual use cases. HWind provides snapshots (instantaneous views of the storm’s wind field) and cumulative footprints (past swaths of the maximum wind speeds) every six hours. In addition, for the last two hurricane seasons RMS has been delivering forecast data that includes a series of forecast scenarios of both the wind and surge hazard, enabling users to understand the potential severity of the event up to five days in advance of landfall.

“Because HWind real-time products are released up to every six hours, you can adapt your response as forecasts shift. After an event has struck you very quickly get a good view of which areas have been impacted and to what level of severity,” explains Higgins.

The level of detail is another key differentiator. In contrast to the NHC forecasts, which do not include a detailed wind field, HWind provides much more data granularity, with forecast wind and surge scenarios developed by leveraging the RMS North Atlantic Hurricane Models. Snapshots and cumulative footprints, meanwhile, represent the wind field on a 1x1 kilometer grid. And while the NHC does provide uncertainty metrics in its forecasts, such as the “cone of uncertainty” around where the center of the storm will track, these are typically based on historical statistics.

“HWind accounts for the actual level of model convergence for a particular storm. That provides you with the insights you need to make decisions around how much confidence to place in each forecast, including whether a more conservative approach is required in cases of heightened uncertainty,” Higgins explains.

HWind’s observational approach and access to more than 30 data sources, some of which are exclusive to RMS, means users are better able to capture a particular wind field and apply that data across a wide variety of use cases. Some HWind clients – most notably, Swiss Re – also use it as a trigger for parametric insurance policies.

“That’s a critical component for some of our clients,” says Higgins. “For a parametric trigger, you want to make sure you have as accurate as possible a view of the wind speed experienced at underwritten locations when a hurricane strikes.”

Real-time data is only one part of the picture. The HWind Enhanced Archive is a catalog of data – including high-resolution images, snapshots and footprints from historical hurricanes extending back almost 30 years that can be used to validate historical claims and loss experience.

“When we're creating forecasts in real time, we only have the information of what has come before [in that particular storm],” says Higgins. “With the archive, we can take advantage of the data that comes in after we produce the snapshots and use all of that to produce an enhanced archive to improve what we do in real time.”

Taking the Stress out of Event Response

“Event response is quite a stressful time for the insurance industry, because they've got to make business decisions based around what their losses could be,” says Sam Lucas, RMS senior product management analyst responsible for the ExposureIQ application, which uses the cloud-based platform, Risk Intelligence. “At the time of these live events, there's always increased scrutiny around their exposure and reporting.”

HWind has plugged the gap in the market for a tool that can provide earlier, more frequent and more detailed insights into the potential impact of a hurricane before, during and following landfall.

“The key reason for having HWind available with ExposureIQ is to have it all in one place,” explains Lucas. “There are many different sources of information out there, and during a live event the last thing you want to do is be scrambling across websites trying to see who's released what and then pull it across to your environment, so you can overlay it on your live portfolio of risks. As soon as we release the accumulation footprints, they are uploaded directly into the application, making it faster and more convenient for users to generate an understanding of potential loss for their specific portfolios,” says Lucas.

RMS applications such as ExposureIQ, and the modeling application Risk Modeler, all use the same SaaS platform: Risk Intelligence. This allows for a continuous workflow, allowing users to generate both accumulation analytics as well as modeled losses from the same set of exposure data.

During an event, for example, with the seven hurricane scenarios that form part of the HWind data flow, the detailed wind fields and tracks (see Figure below) and the storm surge footprints for each scenario can be viewed on the ExposureIQ application for clients to run accumulations against. The application has a robust integrated mapping service that allows users to view their losses and hot spots on a map, and it also includes the functionality to switch to see the same data distributed in loss tables if that is preferred.

“Now that we have both those on view in the cloud, you can overlay the footprint files on top of your exposures, and quickly see it before you even run [the accumulations],” says Lucas.

RMS HWind forecast on RMS ExposureIQ
Figure 1: RMS HWind forecast probability of peak gusts greater than 80 miles per hour from Hurricane Ida at 1200UTC August 29, 2021, overlaid on exposure data within the RMS ExposureIQ application

One-Stop Shop

This close interaction between HWind and the ExposureIQ application indicates another advantage of the RMS product suite – the use of consistent event response data across the platform so exposure mapping and modeling are all in one place.

“The idea is that by having it on the cloud, it is much more performant; you can analyze online portfolios a lot more quickly, and you can get those reports to your board a lot faster than previously,” says Lucas.

In contrast to other solutions in the market, which typically use third-party hazard tools and modeling platforms, the RMS suite has a consistent model methodology flowing through the entire product chain.

“That's really where the sweet spot of ExposureIQ is – this is all one connected ecosystem,” says Lucas. “I get my data into ExposureIQ and it is in the same format as Risk Modeler, so I don't need to convert anything. Both products use a consistent financial model too – so you are confident the underlying policy and reinsurance terms are being applied in the same way.”

The modular nature of the RMS application ecosystem means that, in addition to hurricane risks, data on perils such as flood, earthquake and wildfire are also available – and then processed by the relevant risk modeling tool to give clients insights on their potential losses. “With that indication of where you might expect to experience claims, and how severe those claims might be, you can start to reach out to policyholders to understand if they've been affected,” says Higgins.

At this point, clients are then in a good position to start building their claims deployment strategy, preparing claims adjusters to visit impacted sites and briefing reserving and other teams on when to start processing payments.

But even before a hurricane has made landfall, clients can make use of forecast wind fields to identify locations that might be affected in advance of the storm and warn policyholders to prepare accordingly. “That can not only help policyholders to protect their property but also mitigate insurance losses as well,” says Higgins. “Similarly, you can use it to apply an underwriting moratorium in advance of a storm. Identify areas that are likely to be impacted, and then feed that into underwriting processes to ensure that no one can write a policy in the region when a storm is approaching.”

The First Unified Risk Modeling Platform

Previously, before moving to an integrated, cloud-based platform, these tools would likely have been hosted using on-premises servers with all the significant infrastructure costs that implies.

Now, in addition to accessing a full suite of products via a single cloud-based platform, RMS clients can also leverage the company’s three decades of modeling expertise, benefiting from a strong foundation of trusted exposure data to help manage their exposures. “A key goal for a lot of people responding to events is initially to understand what locations are affected, how severely they're affected, and what their total exposed limit is, and to inform things like deploying claims adjusters,” says Higgins.

And beyond the exposure management function, argues Lucas, it’s about gearing up for the potential pain of those claims, the processes that go around that and the communication to the board. “These catastrophic events can have a significant impact on a company’s revenue, and the full implications – and any potential mitigation – needs to be well understood.”

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