JBA Risk Management (JBA), leading catastrophe modeller, announces the industry’s first fully probabilistic China catastrophe model for inland flood today to meet the risk management needs of the private insurance markets and government sector.
JBA partnered with Aspen Re, the reinsurance segment of Aspen Insurance Holdings Limited (“Aspen”), in developing the Continental China Flood Model, which combines JBA’s expertise in flood modelling and Aspen’s extensive market knowledge and experience to model losses occurring from a range of flood scenarios.
Alan Calder, Head of Cat Risk Management at Aspen, comments “Collaborating with JBA to develop this model has allowed us to bring our understanding of exposure and vulnerability in China to the model development process alongside JBA’s extensive modelling experience. As the first fully probabilistic model for inland flood in China, it will provide (re)insurers with the necessary tools to help to better understand this risk in a growing market.”
The Continental China Flood Model will allow users to disaggregate province-level exposure data to a higher resolution for modelling – a process which provides a realistic view of the spatial location of insured exposure across China. This was an important feature of the development work as it helps (re)insurers address one of the principle challenges for models in this region – aggregate exposure data. High resolution modelling of industrial exposure is enabled by matching coordinate-level address information to industrial site footprints, enabling (re)insurers to gain a more complete view of flood risk for these key centres.
Another key feature is the ability to run the model for river and surface water flooding across typhoon and non-typhoon driven events. This allows (re)insurers to better understand what the drivers of loss may be and identify the impact of typhoon events on overall losses. Global (re)insurers can now assess their potential flood losses, price business and manage their portfolios using new model analytics.
Dr Iain Willis, Managing Director of JBA Risk Management Singapore, commented on the new model: “The importance of getting communities back on their feet quickly after a natural disaster is paramount to ensuring that damage to livelihoods is minimised. The new China Model, like all catastrophe models, is aimed at facilitating that process through helping risk transfer so society at large can be better prepared for coping with such events.”
“Floods make up 24% of economic losses caused by catastrophic events in China and the development of this new model is timely in light of the growing demand for better flood risk analysis.”
Flood insurance is vital in helping to protect communities against flood, although insurance penetration remains relatively low in China. For instance, a Yangtze River flood event in 2016 resulted in losses amounting to USD 23 billion and less than 2% of that is insured for. However, the non-life insurance market is rapidly developing with an estimated 24% average annual growth in the Property & Casualty (P&C) market premium between 2006-2015 (Aon Benfield 2006-2015).