RMS has released significant updates to its U.S. Wildfire HD and U.S. Inland Flood HD Models, part of the High Definition (HD) Model suite on RMS Risk Modeler™ powered by RMS Risk Intelligence™.
Flood and wildfire events across the U.S. are on a steep upward trend in severity and exposure. As of last month, we’ve estimated recent wildfires could cost up to US$ 8.0 billion of insured losses contributing to an already high price tag of wildfire events over the past several years. Flood risk is experiencing a similar trajectory as recent events such as Hurricane Harvey, where 90% of the insured losses were caused by inland flood, demonstrated the extreme damage that water can cause.
Historically, the insurance sector has lacked the right tools and data to evaluate and manage all sources of flood and wildfire risk. However, as the cost of wildfires and flooding events continues to increase, causing billions of dollars of damage on an annual basis, the market is evolving its approach to these perils by embracing new modeling techniques and data. For (re)insurers, regulators, capital markets, and even corporations, actively managing the risk is the only way to prepare effectively for the seasons ahead.
RMS U.S. Flood HD Model
Flood is a high frequency peril in the U.S., and historically a challenge to model because of its complexity and the lack of quality data available. The U.S. witnessed large losses from disasters such as Hurricane Harvey in 2017 and Hurricane Florence in 2018 which caught the insurance sector by surprise. At the time, the FEMA flood data and the risk models available in market lacked the granularity required to sufficiently quantify the risk from flood-related disasters.
At RMS, the approach to flood modeling considers all key drivers and mitigators, robust vulnerability relationships, and explicit modeling of first floor heights. Simulating over 50,000 years of precipitation, flood events are modeled continuously and as time series to fully capture temporal conditions such as clustering of flood events, and to describe key factors, such as antecedent wetness conditions (i.e. flow, and soil moisture content) at the onset of an event. This type of high quality, granular data, and the computational power required to process it, has only recently become available with the release of the RMS U.S. Inland Flood HD Model, and will set RMS clients’ insights ahead of the market.
RMS North America HD Wildfire Models
The insurance industry is on the verge of a crisis as megafires affect the CA market. Traditionally, the insurance market has relied on inadequate zoning and mapping products, but recent catastrophic events highlighted these deficiencies, including the failure to account for structural vulnerabilities and the inability to highlight areas susceptible to urban conflagrations, amongst others. Exposure is increasing rapidly, meaning the need to stay one step ahead is greater than ever.
The RMS North America Wildfire HD Model Suite captures the full impact of wildfire at high resolution to enable an unprecedented understanding of the complex behaviours that characterize fire spread, ember accumulation, and smoke dispersion. Simulating over 72 million wildfires across the contiguous U.S., the U.S. Wildfire Model incorporates the latest insights from recent wildfire events and enables RMS clients to take a more granular and comprehensive approach to underwriting and portfolio management.
Michael Young, vice president, model product development at RMS said, “A deeper understanding of the impact of flood and wildfire provides carriers with a more complete view of risk. The innovations in our high-resolution risk models set a new standard for the modeling of U.S. flood and wildfire, and we are certain that the market will reap the benefits.”