March 18, 2015 by Canadian Underwriter
Impact Forecasting, Aon Benfield’s catastrophe model development team, announced on Wednesday that it is applying a new blast engineering approach to provide a more realistic understanding of the potential range of losses from a terrorist attack.
Impact Forecasting’s terrorism risk experts utilize computational fluid dynamics (CFD) software developed over many years in conjunction with the United States military and government to define an explosion and how it moves within a 3D urban environment, Impact Forecasting said in a statement. The approach is used by the New York Police Department and federal security agencies to plan preparedness, resilience and surveillance strategies with regards to terrorist attacks.
The new approach breaks from traditional blast radius modelling by taking into account a number of nuances that are absent in current blast analysis that can have a substantial impact on the losses, the statement said. For example, if a structure deflects the blast away from an insured building shielding it from damage; if an insured location is on the 16th floor and damage is only on lower floors; or if the blast is channelled down a street to hit a target further afield – all of these factors have a material impact on the damage that can accrue.
Mark Lynch, who leads political risk model development at Impact Forecasting, said that the tool will help insurers “manage risk more strategically, providing important insight for underwriters, reinsurance buyers and exposure managers. Most encouragingly, we can now apply CFD analysis to any city across the world upon client request, quantifying the effect of location and blast size uncertainties to highlight the variation of the possible impacts.”
Impact Forecasting’s in-house security experts assist insurers in identifying possible scenarios by analyzing both the size and location of a potential blast, depending on the security procedures in place coupled with the operational and ideological changes in global terrorism, the statement said. Multiple variables are taken into account and quantified including: magnitude, epicentre of detonation and chemical composition of explosive material.
This allows insurers to achieve an understanding of the uncertainties and variations in results caused by changes to the location and magnitude of the device, in addition to obtaining a view on potential worst case scenarios and variations.
The loss calculation is run in Impact Forecasting’s customizable loss calculation platform, meaning that insurers can customize the model around their specific portfolio data for more accurate results; quantify losses in 3D to model the effect of building height; and see ‘behind the scenes’ to help improve internal and regulatory reporting.