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Earthquake focus—Aon Benfield


“Expert judgement and collaboration with the leading institutions, including calibration with data from


recognised academic or international relief organisations, is a crucial step in the model’s development.”


models considering the new scientific developments and loss data from recent events is particularly important for the territories with large insured portfolios.


E some of Equally, there is increasing demand to cover territories and portfolios


not considered so far, in addition to the creation of regional models to account for possible trans-boundary effects, the inclusion of non- modelled perils (earthquake-triggered tsunamis), the quantification of cumulative risk in case of consecutive events and the quantification of life-risk.


LESSONS LEARNED The recent catastrophes in Chile, New Zealand and Japan have shown the limitations of catastrophe models and the potential


for


underestimation of losses, in addition to identifying future developments necessary to improve such models.


For example, the 2011 Christchurch earthquakes have highlighted


the need of a better understanding of seismic sources, triggered events and earthquakes behaviour in general, as well as the limitations of current models to account for possible cumulative


losses of


consecutive events. The 2010 Maule and 2011 Tohoku earthquakes have demonstrated


the necessity of introducing tsunami as a standard secondary peril for earthquake models in tsunamigenic zones. The science behind tsunami modelling is still in its early stages and large regional models including wave propagation and run-up heights are still to be developed. However, recognising the urgency of the problem, the catastrophe modellers have already started to discuss with the scientific community the available tsunami hazard and loss models and their possible incorporation within the loss calculation platforms.


EARTHQUAKE LIFE-RISK MODELLING Earthquake


casualty modelling is fundamental for enabling


catastrophe life insurers to understand their possible financial losses and in turn to buy the most relevant reinsurance cover. However, the modelling capabilities in this domain are not in their advanced phase. First, this is because existing models are based on the worldwide data, so the regional and local component is considered as weak.


Second, the models are based on data from very strong to catastrophic


earthquakes, so the estimates for weaker events are simply an extrapolation with recognisable uncertainty. Third, there is a lack of systematised recent epidemiological data to be used for calibration purposes and consensus in injury severity categorisation.


56 | INTELLIGENT INSURER | October 2011


arthquake catastrophe modelling today faces many challenges, not least in response to the recent events in Chile, New Zealand and Japan. The need for frequent updates of existing


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