In a development relevant to Bermuda re/insurers with wildfire exposure, RMS has created a catastrophe model to better manage wildfire risk in the US, against backdrop of over $30 billion in claims since 2014.
RMS US Wildfire HD Model offers an improvement on zoning and mapping products currently used by the re/insurers to evaluate wildfire risk.
Bermuda reinsurers felt the sting of California wildfires in their fourth quarter and full year results, losses in the hundreds of millions of dollars.
Among the impacted reinsurers are Arch, Argo, Blue Capital, Chubb, Everest Re, Lancashire, Qatar Re, and Renaissance Re.
The risk modelling and analytics firm RMS claims the product to be the "most comprehensive solution" in the market.
RMS argued existing methods can fail to account for structural vulnerabilities, are unable to highlight areas susceptible to urban conflagrations, coarse resolution, and lack probability based insight.
The model is said to capture the full impact of wildfire at high resolution to enable an "unprecedented understanding of the complex behaviours" that characterise fire spread, ember accumulation, and smoke dispersion. It offers a more granular and comprehensive approach to underwriting and portfolio management.
“The past five years have demonstrated that the industry needs better ways to manage their wildfire risk comprehensively: for underwriting, for reinsurance purchasing, and for capital management,” said Chris Folkman, senior director of product management at RMS.
RMS partnered with insurers, mitigation experts, and government agencies to ensure that the model’s data, calibration, and scope addresses market gaps.
Folkman continued: “After three consecutive seasons with major cat events, it’s clear that wildfire needs to be treated more like a peak peril and less like a simple matter of attritional loss. Wildfire risk has a steep gradient, where different houses in the same neighbourhood can have drastically different risk profiles. We’re confident our analytics can equip property writers to price, underwrite, and deploy capital with precision – for any contiguous US location.”
RMS, Cat models, Wildfire, North America