Aon has partnered with academics at the University of Illinois and Central Michigan University to enhance its modelling tools for severe convective storms (SCS) in a move designed to incorporate the latest climate science in the broker’s SCS model.
The broker said the blending of the scientific results with its proprietary tools will enable its clients to “take a more climate-informed view of weather risk”.
The move follows successive years of elevated insured losses from SCS, with the broker estimating insured losses from the peril at $37bn in 2021.
The new collaboration will see the University of Illinois’ Dr Robert Trapp and Central Michigan University’s Dr John Allen work with the broker to provide data that informs the model’s computational analysis around frequency, severity and geographic distribution of hail, tornadoes and straight-line winds.
Trapp said climate change impacts on SCS remains one of the areas of highest uncertainty in the academic literature.
“This project will help us to understand how that uncertainty can be translated into real-world impacts,” he said.
Enhancing industry understanding
Adam Podlaha, head of Impact Forecasting at Aon, told The Insurer collaborating with academia was an important way of enhancing industry understanding of perils such as SCS, as well as providing industry insights that are of benefit to the academic community.
“This collaboration goes well beyond a simple resampling of historical events or an in-house view of risk based on an interpretation of the academic literature, and instead new research has been developed to derive a view of risk directly from the source – the academic experts at the leading edge of climate science,” he said.
“This independent view, coupled with our domain expertise, ensures that our clients can face the future with a full understanding of the potential changes to this increasingly important peril.”
He said the climate-informed model would ensure users are better informed around what has traditionally been considered a “secondary peril”, increasing their ability to align reinsurance purchases, provide enhanced reporting to external stakeholders, as well as assisting in the development of resilience strategies.
Podlaha said the collaboration highlighted how public-private partnerships can play a key role in advancing the (re)insurance industry’s understanding and resilience in a changing climate.
The broker has an existing partnership with Columbia University around quantification of the effect of climate change on tropical cyclones.
Podlaha said an increase in academic collaboration would be one of the trends shaping the evolution of catastrophe modelling over the next five years.
“There will be an increasing trend of bringing academia more into insurance industry practice,” he said.
Open catastrophe modelling
He also said the development of the open catastrophe modelling community, through initiatives such as the Oasis Loss Modelling Framework and open data standards, would allow people to use more diverse tools and models through standardising certain inputs and outputs.
The new collaboration follows the recent update to Aon’s European windstorm model.
This update to the model, the largest since its release in 2015, introduces a range of new features, including a revision of the vulnerability component for all countries, modelling for detailed residential portfolio classes as well as motor portfolios, expansion to Central and Eastern Europe (CEE), and additional historical events from recent years including storms Dudley, Eunice and Franklin.
“It can now quantify losses for more detailed residential classes of business, as well as motor, expands its scope to CEE, and for the UK includes storm surge, on which we have collaborated with JBA Risk Management,” Podlaha said.
He said Impact Forecasting also plans to release updated versions of its US hurricane, SCS and wildfire models later in 2022.
The new academic partnership is the latest move by Aon towards enhancing resilience against climate-related perils.
Aon’s global chairman of Reinsurance Solutions Dominic Christian yesterday unveiled a proposal alongside Pool Re’s Julian Enoizi for a new UK initiative designed to facilitate industry and government collaboration to promote resilience to systemic risks such as climate change.