Impact Forecasting launches cat model for East Africa earthquakes

Impact Forecasting, the catastrophe model development arm of Aon Benfield, has launched a new model for East Africa, which the company says is the first for the region.

The catastrophe model quantifies the financial impact of earthquakes in the region, which includes seismically active areas of Kenya, Tanzania and Uganda.

The region experienced a 6.8-magnitude earthquake in 2005 and a 6.0-magnitude event in 2007. A similar event could have a major effect on Kampala, Nairobi or other major cities, which woujld have implications for the insurance and reinsurance markets, according to Impact Forecasting.

The new model was developed using earthquake data from local and international experts, including the University of Pretoria Natural Hazard Centre Africa.

To assess the impact of the hazard against the building resilience, the model analyzes more than 500,000 events against three occupancies (residential, commercial and industrial) and 24 structural types including three height and age categories. Portfolios can be modelled using CRESTA and State administrative levels.

“The African economies are growing pretty fast and so will insurance penetration in the region,” Simon Chikumbu, CEO of Aon Benfield Africa, noted in a statement.

“Insurers and reinsurers in Kenya, Tanzania and Uganda are therefore seeking a greater understanding of the seismic risk in the region.

This is to gain greater knowledge and better insights  of their exposure and enable better decisions on matters such as capital, risk pricing and reinsurance requirements Up to now very little scientific research has been put into action in such a model to understand this risk in the region.”

The model is available in ELEMENTS, Impact Forecasting’s loss calculation platform.