Willis Re launches first of its kind flood model for the MENA region

Willis Re launches first of its kind flood model for the MENA region 150 150 Haggie Partners

Willis Re has launched a new flood model for the Middle East and North Africa (MENA) region. It is the first of its kind to be developed for the region, enabling (re)insurers to quantify their flood risk using a catastrophe model. Currently the model covers Morocco, the United Arab Emirates, and the Kingdom of Saudi Arabia, with further releases for Oman, Qatar and Egypt during the third and fourth quarter of 2021.

This model was developed through the collaboration of Willis Re’s in-house peril experts with leading flood specialists, KatRisk, and resources from the Willis Research Network (WRN). The latest flood hazard layers and loss aggregation methodologies are used to generate location level losses as well as portfolio outputs for a 50,000-year simulation period.

The main business applications of the MENA flood cat model include:

  • Structuring and pricing reinsurance layers for purchasing suitable protection
  • Assessing capital adequacy and responding to regulatory solvency requirements
  • Portfolio management and optimisation
  • Responding to rating agency requests

Floods are relatively common in the MENA region. Damage from floods can come from pluvial and fluvial flooding, with fluvial flooding being more predictable due to proximity to river networks. Pluvial flooding is more unpredictable due to the arid desert environment which after intense rainfall may cause runoff and flash floods, particularly in urban areas where the soil is covered by impermeable man-made surfaces. This combined with Wadis (dry riverbeds) channels water after intense precipitation and causes unpredictable and localised flooding. These flood events have the capability to cause important economic and insured losses.

Such floods are likely to impact the lower return periods of the exceedance probability curve, therefore impacting (re)insurers profitability and making it more and more vital for (re)insurers to mitigate this profit volatility by modelling the risk.

Natalie van de Coolwijk, Chief Executive Officer, Middle East and Africa, said: “We are extremely pleased to announce the addition of the MENA flood model to our toolkit. Continued commitment to our clients and the region requires us to enhance our capabilities relating to the more tangible and frequently observed perils. These capabilities will only become more relevant as the landscape evolves and the effects of climate change become more apparent. Building a more robust view of risk for perils such as flood means we can tailor fit-for-future reinsurance programmes for our clients and more scientifically quantify impact on claims and reinsurance costs. Being able to give clients more comfort and certainty around reinsurance cover and costs is at the core of our purpose, ultimately contributing towards a better protected and more resilient insurance industry.”

ChemsEddine Kassali, Regional Director, Middle East and North Africa, added: “The Willis Re team proves once again its full commitment and dedication to the MENA region with our latest model release adding to our already well-established and successful MENA Earthquake model: Our partially probabilistic flood model is the first of its kind for the region and we are all proud of this achievement that will benefit our clients in helping them to shape their view of risk now and in future.”

Dr Tina Thomson, Regional Director, Head of Catastrophe Analytics EMEA West-South, commented: “The newly developed MENA Flood Model is Willis Re’s response to a re/insurance industry ever more focused on the need to understand and fully manage risk, exposure, and climate change effects on business, even in geographical areas traditionally not serviced by commercially available Cat Models. Our work in this region demonstrates our commitment to clients in providing key insights for improved risk and volatility mitigation on reinsurance programs while enabling sensitivity testing for potential climate change impacts.”

For more detail please go to https://www.willistowerswatson.com/en-EG/Insights/2021/09/the-first-mena-flood-model-specific-to-the-region