Catastrophe Modeling Inland Marine Exposures Is there a level of synergy between the cat models, the Inland Marine Underwriter, and the Inland marine product lines?

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What do you think?

Have our Models

gone too far?

Or have they not gone far enough?

Table of Contents / Agenda

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Cat Modeling 101 – The four box approach

Top Inland Marine Covers

Top covers and the four box approach – what works and what does not work

The first cat model

Remember when….

Then Now

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Remember when….

Lost

– activity

– interaction

– negotiation

– skill

– health

– doing knowledge

– experience

Gained

– technical skills

– hand dexterity

– PC Skills

– On line skills

– third hand knowledge

– play anytime

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Map Vs GPS

A GPS will get you there in the most efficient way but it won't tell you about other surrounding options or other attractions that may be important to you. (Tourist attractions, landmarks, family and etc).

Landmark

Landmark

Landmark

Landmark

Family

Family

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Quality of address entry in GPS similar to data quality in Cat tools, can the model recognize your data

21-144 21st Place. Queens, NY

21-144 21 St. Queens, NY

Try entering a Queens address in GPS….too many confusing options

21 st St or?

Which 21st ? You could end

up at the wrong location

Cat Modeling 101

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Slide 8

Basic Cat Modeling Methodology The four box model approach

Hazard Value Distribution Vulnerability Insurance Conditions

Where, how often and how strong?

What damage degree? What is covered?

• Deductibles • Covers • Shares • Exclusions • …

Where, what and characteristics?

Andy's rule: No natural catastrophe model is entirely

applicable in more than 95% of all business instances – some types of coverage even less so.

Many believe that a model is

applicable 100% of the

time

Others are not so sure

Really now?

Concern: If we depend too much on models then we may lose our ability to challenge models when we think that the models are wrong

Slide 9

Basic Cat Modeling Methodology The four box model approach

Hazard

Where, how often and how strong?

Hurricane – Very good understanding of the hazard, severity and frequency although opinions may differ on wind filling and current climate views.

Earthquake also generally good although some concern about extreme magnitude, liquefaction, and models inability to recognize higher frequency of after shocks. Very weak in Tsunami assessment.

Tornado – Difficult to model severity and track possibility of missing or hitting

Flood – Zones identified but events not modeled by most modelers

Brush fire – Zones identified but frequency highly dependent on prior year's weather patterns.

Other hazards missing.

Slide 10

Basic Cat Modeling Methodology The four box model approach

Street address/coordinates of location.

For some perils (flood) this is critical for others less so.

COPE information

Exposure values – Building, Contents, BI

Value Distribution

Where and how? …

Gas stations are very vulnerable to wind due to the open structure whereas banks are not as vulnerable. Cat models recognize this but will be fooled by a bank occupancy where the design is more like that of a gas station.

Slide 11

50.0

Models apply mean damage functions. The scatter plot diagram below represents the actual losses to a similarly constructed single family home at specific wind fields. At a given wind speed most of the risks had a loss of under 1% of the exposed structural value. Nevertheless the range of outcomes was between 0.1% and 50%.

Vulnerability

What damage degree?

Basic Cat Modeling Methodology The four box model approach

Models use actual claims data, when there is

enough data. When there is not enough data

expert opinion is used?

Drag line???? Sure I can do that !??!

Slide 12

Vulnerability

What damage degree?

Basic Cat Modeling Methodology The four box model approach

Structural versus non-structural

Models recognize the differences in structures and code years but only can make an educated

guess on the non-structural design.

HVAC

Parapet

Chimney

Non-load bearing Interior wall

Furniture

Electrical

IT

AC Unit

Basic Cat Modeling Methodology The four box model approach

Insurance Conditions

What is $$ covered?

• Deductibles • Covers • Shares • Exclusions • …

Act of God Negligence

Bill of Lading Terms and Conditions

Legal Liability Care Custody and Control

RC or ACV Values at Risk

Limit or Blanket Limit

Builders Risk/Installation Floater

Contractor's equipment

Motor Truck Cargo/ Warehouseman's Legal

DIC

EDP

Owned Cargo/Stock through put

Open Lot

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Top Inland Marine Covers

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Top Inland Marine Cover – Builders Risk

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Top Inland Marine Cover – Contractors Equipment

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Top Inland Marine Cover – MTC

Inland Marine is not fixed and the contents vary. As such the hazard and

damageability differs.

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Top Inland Marine Cover – DIC

Are all the hazards modeled?

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Top Inland Marine Cover – EDP

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Top Inland Marine Cover – Stock Throughput and Supply Chain BI

Unsure of location, true values, BI, and other items/

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Top Inland Marine Cover – Open lot

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Inland Marine Scorecard

Builders Risk Installation Floater Contractors Equipment MTC/WLL DIC EDP Cargo/Stock Through put Open Lot

Hazard Value Distribution

Vulnerability Insurance Conditions

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Y Y N ? Y Y Y Y Y Y Y ? Y Y

Y N Y ? Y N Y ? ? Y Y ? ? ?

Y N Y ? N Y N N ? -- -- ? Y ?

Y N Y ? Y Y Y Y Y Y Y ? Y Y

Y Y N ? N N N N Y ? ? ? Y ?

Y N Y ? Y N Y Y Y -- -- ? Y Y

Y N Y ? N N N N ? Y N ? Y N

How strong is the synergy between model and coverage?

Thank you