Why GRM?

Don’t Risk Your Company’s Future on Natural Catastrophe Modeling Alone

Natural hazard risks represent a significant threat to businesses and the economy. The 2006 natural catastrophe season was relatively uneventful, but the impact from prior years is here to stay. The Risk Manager who possesses and uses thorough information to evaluate and mitigate these risks will be better positioned prior to a natural catastrophe, more resilient when an event occurs, and suffer fewer losses.

Risk Managers face a tough insurance market for natural perils. Companies are retaining more risk, and among the dwindling options for natural peril coverage, premiums are skyrocketing, deductibles are higher, and Risk Managers are encountering decreased capacity and lower limits available for renewal.

Although computer modeling has become the norm in the insurance industry to evaluate natural hazard risk, Risk Managers must understand the limitations of this portfolio-based analysis. They should take action to obtain the specific details necessary to refine results and assure accuracy of their real catastrophe exposures, which will enable them to make informed decisions within their organizations.

Go Beyond Natural Catastrophe Modeling

Site-specific assessments by structural engineers can provide the accuracy and level of detail needed for key risk management and business decisions.

Global Risk Miyamoto was created to put clients in a better position by having complete and accurate information for critical natural peril risk solutions. Formed by Global Risk Consultants, the worldwide leader in unbundled loss control, and Miyamoto International, one of the top structural engineering firms in California, its purpose is to provide the risk management community with accurate, site-specific risk identification, loss estimation and risk mitigation recommendations for natural perils - focusing on earthquake, hurricane, windstorm, and flood.

Natural Catastrophe Modeling Limitations

Natural Catastrophe (CAT) models were built primarily for insurance underwriters for very large portfolio analysis.

CAT models require accurate structural and site-specific characteristics just to get "average" results. Model input data is often wrong or assumed.

Using inaccurate or default CAT model data can:

• Seriously underestimate damage, putting a company in financial risk if actual exposure is higher.
• Overestimate damage, leading a company to buy far more insurance than is necessary and have high deductibles when actual exposure is lower.
  

Accurate Risk Information and its Benefits

Risk Managers every day make important risk reduction and insurance decisions to protect corporate assets. Decisions based on bad data can threaten the very existence of a company following a natural disaster.

• Having accurate data is key to making informed business decisions.
• Relying on local codes or model interpolations based on estimated information is risky, at best.
• Information needed by insurers is not the only information needed to make sound risk management decisions.

Site-specific analysis is essential for primary/critical sites or highly-protected risks, business interruption or market-share driven sites, contents and/or equipment-intensive facilities, and countries where design, construction, and inspection practices are weak or more variable.

This new approach goes far beyond desktop portfolio computer models currently in use by taking the study to a site-specific analysis. By conducting a phased site-specific study at your critical locations, business decisions are based on actual expected loss scenarios, damage estimates, and retrofit schemes.

Summary

• Be aware of the limitations of portfolio-based modeling.
• Understand the details necessary to refine results and assure accuracy of real catastrophe exposures and, in turn, make informed decisions.
• Be better positioned prior to a natural catastrophe and more resilient when an event occurs — and suffer comparatively fewer losses.
• Site-specific assessments by structural engineers will provide the necessary accuracy and mitigation details for key decisions.

Global Risk Miyamoto Risk Reduction Program for Site-Specific Analysis:

• Utilizes structural engineers specializing in natural hazard risk analysis.
• Defines the risks and quantifies the damage (PML).
• Makes informed decisions regarding levels of risk, company risk tolerance, and prioritizes next steps.
• Performs detailed analysis and develops mitigation needs on a prioritized basis.
• Develops detailed options for strengthening and performs cost-benefit analysis.
• Eliminates desk-top-only CAT modeling uncertainties.

To learn more about how this program can provide complete and accurate data for informed decision-making, contact one of our offices or Email GRM.