Guy Carpenter, EQECAT Launch New Sea Surge Model for France, Sweden

September 5, 2006

Guy Carpenter & Company, Inc., the global risk and reinsurance specialist of the Marsh & McLennan Companies, announced that its Instrat(R) unit, which provides quantitative analysis and modeling services, has collaborated with catastrophe modeler EQECAT to develop a model to calculate sea surge losses in key coastal regions of France and Sweden.

“The model, which focuses on seventeen coastal departments on the northern and western coasts of France and 27 crestas on the southwestern coast of Sweden, gives an estimate of the additional cost generated by sea surge during windstorm events,” said the bulletin. “By incorporating historical data, information from oceanographic and meteorological stations, and detail on flood defenses and the built environment, the new model allows the correlation between wind and surge events in these regions to be calculated for the first time.”

“A number of recent meteorological events, most notably windstorm Martin in France (1999) and Hurricane Katrina (2005), have brought the correlation between wind and surge perils into tighter focus and created a growing awareness across the insurance industry of the need to better understand sea surge risks,” noted Jane Toothill, Head of Guy Carpenter’s European Model Development Team.

“Sea surge is a very complex phenomenon, influenced by factors such as wind-sea interaction, tides, coastal topography and man-made defenses. We have worked closely with experts at EQECAT to develop a model that incorporates data from a number of sources and enables a comprehensive assessment of sea surge exposure in two of Europe’s more vulnerable regions,” she continued.

Guy Carpenter said: “The new sea surge model uses the detailed probabilistic windstorm event set available in EQECAT’s Eurowind model as a basis for the estimation of the additional loss component caused by sea surge in windstorm events. Thus the model strives to fully address the correlation between wind and sea surge losses, and estimates the surge loss component as a proportion of the Total Insured Value (TIV), per line of business, coverage and country unit covered, caused by each surge event. Individual reinsurance structures are then applied through Guy Carpenter’s dynamic financial analysis software, MetaRisk(TM).”

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