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Impact Forecasting Launch Combined Earthquake And Tsunami Catastrophe Model For Chile

Impact Forecasting is the first to launch a Chile earthquake model that incorporates tsunami.

On February 27, 2010, a catastrophic earthquake struck near the central coast of Chile - also triggering a tsunami - which at the time made it the second-costliest insured earthquake event in history (second only to the 1994 Northridge, California event). The overall economic damages from the M8.8 Maule event make it the seventh costliest global earthquake since 1950.

In response, Impact Forecasting has developed a probabilistic model for Chile that combines both earthquake and tsunami. Latest scientific research on the seismic risk in Chile from Aon Benfield Research partners has shaped the results of the tool which have been validated against data from the 2010 Maule event. This now means insurers can more accurately model their portfolios for high resolution exposure data through detailed structural and occupancy types including mortgage books. Scenario analyses can also be conducted for the following historical events: 1960 M9.3 Valdivia, 1985 M8.0 Valparaiso, 2005 M7.8 Tarapaca, 2007 M7.7 Tocopilla and 2010 M8.8 Maule – plus the 1 April 2014 M8.2 Iquique earthquake.

As with all Impact Forecasting models, insurers have the ability to customise the Chile model – for example based on their own claims data – and have access to transparent and detailed model documentation. The model runs on the ELEMENTS loss calculation platform that provides a set of tools to visualize, map, quantify and manage the exposure, hazard, vulnerability and uncertainty in the model.

Joseph Smith, CEO of Aon Benfield Chile, said: "This is an exciting time for the region as it’s the first model of its kind so Impact Forecasting has really pioneered into new territory. The unrivalled model provides an alternative and more realistic view of the earthquake risk in Chile which is a key differentiator for Aon Benfield as we continue to heavily invest in analytics to support insurers and reinsurers in the Latin America region."

Goran Trendafiloski, head of earthquake development at Impact Forecasting, commented: "We are committed to reducing the number of non-modelled perils and tsunami was an important hazard for us to tackle due to the devastating impact it had on Chile. Crucially, we are now able to adapt this local science and new methodology to other countries, enabling an improved understanding of this peril on a global basis. The recent Iquique earthquake has also demonstrated our dedication to provide the best service to our clients through our real time response capability."

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