Willis Re Launches new South Africa Hail Catastrophe Risk Model

Willis Re Launches new South Africa Hail Catastrophe Risk Model

Reinsurance broker Wills Re in March launched a new Hail Catastrophe Risk Model which quantifies the risk from damaging hail events across South Africa.

The model, which was developed in collaboration with Willis Research Network Partners at NASA’s Langley Research Centre and the Karlsruhe Institute of Technology (KIT) in Germany, delivers a robust view of hail risk for the re(insurance) market.

Willis Re explained that the model features a comprehensive stochastic hail catalogue, developed by hail specialists at KIT using NASA satellite-derived data. Applying the latest NASA hail detection algorithms, KIT mapped the distribution of observed frequency and severity. Events and their attributes were then simulated for a 25,000-year period to generate a comprehensive catalogue of hail events, with their footprints and parameter distributions reflecting observations in South Africa.

The company noted that the main applications of the Hail Catastrophe Risk Model outputs include:

- Pricing reinsurance contract layers for purchasing protection in the local and international reinsurance markets

- Independent sense-check for assessing capital adequacy and responding to regulatory solvency requirements

- Portfolio management and optimisation

Willis Re pointed out that hail losses are relatively frequent in South Africa. “Seven of the top ten insured natural catastrophe events since the 1970s in the country are associated with hail, with upwards of 45% of the total value of insured Motor and Property claims from natural perils caused by hail damage. This frequency coupled with the potential for severe loss accumulations – as demonstrated by the catastrophic November 2013 losses in Pretoria – can also threaten insurers’ earnings potential,” the company stated.

Willis Re added that with this kind of prevalent risk at hand, a firm understanding of the potential financial impacts of a devastating 50-year hailstorm or the expected loss over the next ten years is critical.

Willis Re South Africa CEO and Head of Middle East and Africa Natalie van de Coolwijk commented that the updated hail model is an important addition to the firm’s toolkit and reaffirms its market leading position with respect to catastrophe modelling capabilities for the Middle East and Africa region. “ It will serve our clients in assessing their risk management needs for this prevalent peril and allow for a technical view in determining their risk appetite and mitigation measures,” added Van de Coolwijk.

Willis Re Head of Catastrophe Analytics for EMEA West-South Marie- Kristina Thomson said the firm is excited to launch its new hail risk model which will provide effective portfolio hail loss metrics enabling Willis Re clients to derive actionable insights. “In collaboration with our Willis Research Network partners, we have developed a robust view of hail risk across our territories in Europe and now South Africa, underpinned by the latest available data and detection techniques, empowering our clients to make confident risk transfer decisions for hail-sensitive portfolios,” said Thomson.

Kristopher Bedka, Research Scientist at NASA’s Langley Research Centre, said the NASA Applied Science Disasters Program — the sponsor of this NASA collaboration with Willis Re — KIT and a variety of international partners, promote the use of satellite observations to reduce risk and promote resilience from a variety of natural disasters including severe hailstorms on local and global scales.

“NASA satellite-derived products developed within this project are providing unique insights into severe storm climatologies over South Africa and other regions around the globe that have not been extensively observed by ground-based weather radar networks. We are excited to see that these data are providing significant contributions to risk assessment and development of this Catastrophe Model,” said Bedka.

Frequency of hail days across South Africa, taken from Willis Re’s South Africa Hail Model for Property and Motor classes

Willis Re