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Underwriting Boost For Canadian Flood Risks

Impact Forecasting, Aon Benfield’s catastrophe model development team, has developed a fully probabilistic flood model for Canada to help insurers and reinsurers better underwrite and manage their riverine and off-flood plain exposures. The model is licensable and can be rolled out onto insurers’ desktops for easy access. Aon Benfield is the global reinsurance intermediary and capital advisor of Aon plc (NYSE:AON).

The summer of 2013 was a defining moment in Canada’s natural catastrophe history based on the magnitude and devastation caused by flooding in both Calgary and Toronto, becoming the costliest year in the Canadian insurance industry’s history. In the wake of these unprecedented insured and economic losses, coupled with increased uncertainty regarding water damage coverage, managing flood risk became an urgent priority for the Canadian insurance industry.

Once a non-modelled peril, the team of flood and risk experts at Impact Forecasting has developed a new model over the last two years, creating all the components in-house to ensure full ownership and understanding. The model offers a complete view of Canadian flood risk from providing underwriting data that drills down to individual locations while helping insurers to understand the impact of accumulations on their portfolios, to structuring reinsurance cover and fulfilling regulatory and rating agency requirements.

The model comprises the following innovative features:

  • Covers a geographical area representing 98% of the Canadian population.
  • Incorporates essential Canadian hazard content including local sources of spatial (GeoBase government initiative) and hydrological (Environment Canada and Le Centre d’expertise hydrique du Québec) data.
  • Combined hazard resolution of 10 metres for the most exposed areas and 30 metres for remaining parts of Canada.
  • Assesses the potential levels of damage based on loss data from Impact Forecasting’s seven other country-specific flood models and Canadian client claims information to reflect local characteristics.
  • Follows the latest scientific advances including 2-dimensional hydrodynamic modeling of all Canadian flood extents, advanced hydrological data processing and implementation of flood defences.
  • Deployed in ELEMENTS, Impact Forecasting’s loss calculation platform, the model can be used for underwriting needs through its data or as part of a third party system.

Vaclav Rara, flood model developer at Impact Forecasting, commented: “The model is unique in its spatial scope, geographical resolution and state-of-the-art hydrological innovation resulting in enhanced loss accuracy estimates. It allows essential understanding and transparency through access to underlying data and to the developers in Impact Forecasting for ongoing support.”

David Sloan, President and CEO of Aon Benfield Canada, added: "While Southern Alberta and Toronto have diligently been rebuilding their communities following the staggering floods of 2013, our in-house catastrophe experts from across the globe have focused their efforts to develop a flood model for Canada from the ground up. Based on its release, I am thrilled that we are able to provide a high-quality tool that will hopefully transform how Canadian insurers underwrite and manage their flood risks both from a location level and aggregate accumulation perspective."

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