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Insurers Should Plan for Repeat of Benchmark Catastrophe
Events, EQECAT President Says
Integrated Catastrophe Management Systems Called Future
of Catastrophe Modeling
February 25, 2004
(Orlando,
FL --)
The insurance industry must anticipate that catastrophic events, on the magnitude
of the 1992 Hurricane Andrew and the 1906 San Francisco Earthquake, will eventually
recur with losses far exceeding those originally incurred when factoring in
today's values and exposure levels, Rick Clinton, president, EQECAT, Inc. told
a group of insurers and other industry executives at the company's "2004 Catastrophe
Management Summit," here.
EQECAT estimates that a repeat of a storm, the size of
Hurricane Andrew, would cause approximately $28 billion to
$43 billion in insured losses,
and a repeat of a seismic event on the magnitude of the San Francisco earthquake
could cause approximately $31 billion to $59 billion in insured losses, Mr.
Clinton said.
The insurance industry typically uses a 100 year to 250
year points on the exceedance curve as measurement of loss
exposure. "What this translates into is the loss
that would happen once every 100 or 250 years," Mr. Clinton said.
EQECAT estimates the 100 year and 250 year industry loss
for earthquake to be $25 billion and $44 billion, respectively,
and hurricane loss estimates to be $65 billion and $95 billion,
respectively.
EQECAT, the authority in extreme risk modeling, provides leading insurance companies
worldwide with innovative, reliable and technically robust tools and solutions,
covering natural hazards in 88 countries, the highest number of any organization.
Integrated Catastrophe Management: The Future of
Catastrophe Modeling
To position for these kinds of events, the industry should
look toward Integrated Catastrophe Management Systems (ICMS),
which Mr. Clinton said are "the future
of catastrophe modeling."
"Under an ICMS system the catastrophe model or models would
be completely integrated into a company's underwriting and
catastrophe management software system, providing up-to-the-minute
catastrophe management information to all users."
Moving to an integrated program now "is completely within
your power," he said.
EQECAT's ICMS capability enables clients to save time and money by seamlessly
integrating EQECAT catastrophe modeling software into existing in-house underwriting
pricing and accumulation management systems.
Using this approach, insurers can automate the workflow
and make current risk information available enterprise-wide.
These results would flow throughout a company to everyone, from the catastrophe
manager to the underwriter and executive management team, providing more efficiency
and sophistication to each insurer's catastrophe management program.
ICMS enables insurers to effectively use a multiple model
strategy, which mitigates the risk associated with using
only a single model platform.
Catastrophe Bond Market Expected to Grow in 2004
Mr. Clinton also told the conference, "s oftware will continue
to grow in all segments of the insurance industry, as will
EQECAT's consulting revenue, which grew by almost 50 percent
in 2003."
The key areas of EQECAT's consulting growth will continue
to be special studies, securitization and custom software," he
said.
Mr. Clinton told the insurers, that he sees "another good
year for catbonds." He noted that according to Moody's, catbond
issuance was up 50 percent in 2003 and this trend should
continue in 2004."
Currently, over 60 percent of the outstanding issues are
based on EQECAT's technology.
EQECAT is a leader in providing risk analysis support to
insured linked securities. In 2003, it provided support on
three transactions totaling more than $1 billion of risk
transfer. Since 1997, EQECAT has supported the issuance of
more than $3 billion of catastrophe risk involving European
windstorms and earthquakes, Atlantic hurricanes, central
United States and California earthquakes, and Japan earthquakes
and typhoons.
In 2003, EQECAT provided scenario and probabilistic
risk analysis for the largest securitization of earthquake
risk.
EQECAT Serves Global Insurance, Business, Financial Services
EQECAT, an affiliate of ABSG Consulting Inc., serves the
global property and casualty insurance industry, major multinational
corporations and financial institutions. EQECAT is known
as the technical leader and innovator in the development
of analysis tools and methodologies to quantify insurers
and major corporations exposure to natural and manmade catastrophic
risk.
It is a recognized industry thought-leader providing the
expertise and real-world tested tools to turn risk-theory
into innovative actions and solutions to effectively manage
extreme- risk worldwide. EQECAT's flagship product, WORLDCATenterprise
is a multi-user platform to evaluating insured risks for
multiple natural catastrophe perils in 88 countries.
EQECAT was founded in 1994 and is headquartered in Oakland,
California. ABSG Consulting Inc., headquartered in Houston,
Texas, has risk-management revenues of more than $140 million,
and more than 1,000 employees worldwide. For additional information,
please log on to www.absconsulting.com,
or www.EQECAT.com.
For more information,
contact:
Tom Larsen
EQECAT, Inc.
1-510-817-3100 | tlarsen@absconsulting.com
Eric R. Samansky
The Samansky Group
1-516-319-0858 | eric@samanskygroup.com |
