April 1, 2016 by Canadian Underwriter
Sompo Canopius AG, a global specialty lines platform of Sompo Japan Nipponkoa Holdings Inc., announced on Thursday that it has partnered with catastrophe modelling marketing firm Risk Management Solutions (RMS) and six other (re)insurers for the specification and build of what it calls the world’s first marine cat model.
As joint development partner since 2015, Sompo Canopius has worked with RMS to address limitations to the industry’s ability to effectively quantify man-made and natural catastrophe risk to marine classes, Sompo Canopius said in a press release.
Sompo Canopius partnered with RMS and six other (re)insurers to compile data, build and calibrate models to assess vulnerability of cargo more realistically, particularly with respect to product classification, storage and packaging, the release noted. Significant global exposure accumulations have been studied in detail to improve representation of these key risks with respect to natural and man-made perils.
Besides RMS, the partners include Chubb, Aon Benfield, AXIS, Liberty, MS Amlin and Munich Re.
“Significant marine losses such as the 2011 Tohoku earthquake, 2012 Hurricane Sandy and the 2015 Tianjin explosion have improved the understanding of the link between property and marine lines of business,” said Marek Shafer, head of catastrophe management at Sompo Canopius, in the release. “They have also reinforced Sompo Canopius’s belief that the approach to catastrophe management should be holistic across our group. The practice of square pegging marine exposure into the round holes of property catastrophe risk models is now recognized as inappropriate. A new approach is needed to align these correlated classes and our collaboration with RMS represents a key step on this journey.”
On the same day that the marine cat model was announced, RMS published a report examining the current state of cargo modelling in the marine market and explaining key elements in the development of the new model. The report, titled Marine Cargo Catastrophe Modeling: Navigating the Challenges, Charting the Opportunities, also examines the current state, best practices, and future of marine modelling.
Chris Folkman, director of product management at RMS, said in a statement that global sea-based trade tonnage nearly quadrupled between 1970 and 2010. “With higher cargo volumes, larger ships, growing ports, and increasingly efficient terminal operations, exposures at risk are a growing concern,” Folkman said. “(Re)insurers need to have a better grasp of their cargo catastrophe risk and how it correlates with other lines of business. They simply cannot continue to use the outdated methods currently available to them.”