GEM releases a new earthquake loss model for China
GEM released its Earthquake Loss Model for China via Nasdaq Risk Modelling for Catastrophes and Verisk Touchstone platforms. The model is also available in its native OpenQuake format via GEM’s China Model product page.
The China model has been developed by GEM using public sources of information, such as past seismicity, and geodetic and geologic data for the hazard component, combined with exposure and vulnerability data to create the risk model.
The model’s hazard component incorporates both fault and area sources, while the risk component provides estimates of risk to residential, commercial and industrial buildings using GEM’s vulnerability models appropriate to Chinese construction practice. The model also includes exposure data that can be used to estimate total losses to the building stock in addition to portfolio losses.
“GEM's China Earthquake Loss Model has met the highest insurance industry standards required for all catastrophe risk management processes. The model validation process involving GEM partners and catastrophe modelling experts from Hannover Re, Swiss Re, Guy Carpenter, Partner Re and the Institute of Catastrophe Risk Management - NTU Singapore is a testament to GEM’s open, transparent and collaborative approach to earthquake risk modelling.” - Jörg Steffensen, Hannover Re and GEM Governing Board Chair.
“This has been a unique and productive experience for GEM. The fusion of public and private sectors’ interests reinforced GEM’s commitment to provide an alternative view of risk to the world. Informed by industry expertise and data, a diverse team worked together to fully assess risk and incorporate innovative model development processes which can serve as a blueprint for GEM’s future models.” - John Schneider, GEM Secretary General.
Over the last centuries, China has been affected by several seismic events of high magnitude. The combination of high seismicity, exposure and population density led to costly events with a high number of fatalities. Between 1500 and 2004, China was the country that registered the largest number of earthquake fatalities.
This new model will provide physical damage and financial loss metrics due to earthquake ground shaking hazard for scenario events and probabilistic risk assessment, both vital in addressing the insurance protection gap and disaster risk reduction management in China.
Open and collaborative model testing and validation process - a trailblazing approach
GEM sponsor representatives from Hannover Re (Jörg Steffensen), Swiss Re (Michael Ewald, Beat Aeberhardt), Guy Carpenter (Matthew Eagle), Partner Re (Paul Della Marta), and the Institute of Catastrophe Risk Management - NTU Singapore (Tso-Chien Pan), helped GEM in establishing a model testing and validation process using industry loss and exposure data where relevant, and evaluated the model against their own portfolios in order to better understand the model and provide advice to the GEM Foundation technical and scientific teams.
Matthew Eagle, Head of Model Solutions & Advisory, Guy Carpenter said:
“The new China Earthquake Loss Model represents an independent view of risk developed by the GEM Secretariat technical team, combined with broad industry review and validation through a panel of industry risk modelling experts from a number of leading insurance sector companies. Guy Carpenter was delighted to be involved in this initiative to support bringing additional views of risk to the market with added flexibility on the modelling platform deployment”
Beat Aeberhardt, Head Cat Perils Research and Development, Swiss Re Institute said:
“GEM's China Earthquake Loss Model sets a new standard by combining GEM's subject matter expertise and innovative modelling approach with the open-source loss modelling framework OASIS. This joint development has facilitated rigorous co-validation by a panel of risk modelling experts from various insurance industry segments.
We have been delighted to be part of this journey along with natural catastrophe experts from Hannover Re, Partner Re, Guy Carpenter and the Institute of Catastrophe Risk Management - NTU Singapore. Now we are excited about the model's commercial launch via Nasdaq Risk Modelling in the Oasis modelling framework and the VERISK Touchstone platform.
It is amazing to see how GEM's cutting-edge subject matter expertise finds a way to risk model practitioners via an open-source channel. This model offers a novel level of transparency, commercial independence, and true choice for the re/insurance industry. We are looking forward to the next steps into a new area of insurance natural catastrophe risk assessment, with an ever-stronger community joining forces to master hard-to-model earthquake risk in this open book spirit enabled by GEM and Oasis LMF.”
About GEM’s Products and Services
As part of GEM’s products and services strategy, GEM is offering value-added products for a fee such as the new China Model. These value-added products will also be available for free for public-good, non-commercial applications. In turn, the revenue generated from product or services fees will be reinvested to maintain GEM’s core capabilities, with an emphasis on providing support to developing countries.