Catastrophe modeling is a critical component of analyzing and pricing risk. At Zurich, homegrown catastrophe modeling tools, as well as those from Risk Management Solutions Inc. (RMS), Newark, Calif., have been an integral part of its underwriting process for several years-but only for natural disasters.Then along came 9/11, and Zurich-like every other insurer with property and workers' compensation policies in the United States-was completely unprepared.
"Terrorism exposure in the U.S. was something no one had figured out-and I mean no one," says Gary Kaplan, senior vice president and chief underwriting officer at the Schaumburg, Ill.-based U.S. headquarters.
The industry scrambled-and so did Zurich.
"The reinsurers were very nervous after 9/11, so we had to rapidly come up with some new tools," says Rick Harold, vice president and director of enterprise underwriting process and design at Zurich.
The carrier also began working on strategic cat modeling projects, including partnering with Risk Management Solutions to build terrorism modeling into its tools.
"Now we can see what our terrorism exposure is in New York, Los Angeles, and Chicago, for example," Harold says.
The project is called GUARD, for Global Underwriting Accumulations Repository of Data, and it integrates the RiskLink and RiskBrower tools that Zurich licenses from RMS.
RiskLink is a detailed risk modeling and analysis tool used by specialists in the company's underwriting technical center to determine the accumulation of terrorism exposure on a designated portfolio. Accumulations can be calculated for property and workers' compensation lines of business within a specific building or within a specified distance of a given street or latitude and longitude.
RiskBrowser is used by Zurich property underwriters to determine terrorism exposure at the building level while underwriting a specific risk. The tool generates a variety of outputs, such as a building-level map, aerial photographs of the site, and detailed building attributes including the number of stories, construction class, square footage, and year built. Underwriters can run an account or location-level analysis and calculate the incremental impact of a new account or risk on the company's existing accumulations.
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