The National Weather Service has
issued a hurricane warning for all the New Jersey coastal waters, Long Island coastal waters and New York Harbor. [Music and hurricane siren] [Music and mayday call] [Music] Most hurricanes end up going east and or north while off the North Atlantic coast and out to sea. Sandy was really a unique event that it turned inland and came in directly to the New Jersey coast. [Music] In my years at AON, I’ve been witness to many major catastrophe events, not just in the United States, but around the world. I’d say one that really stuck out to me the most was probably in 2013, the EF5 tornado that went through Moore, Oklahoma. We did an on-the-ground damage assessment there and it was just really, just like being on the set of a Hollywood movie in the sense that there’s so much devastation to homes and businesses, schools, and just walking around and feeling the eerie calm, but yet looking up and seeing cars up in the trees, just really sort of a humbling experience and it shows the true fury of Mother Nature. [Music] Reinsurance is insurance for insurance companies. You might not expect that insurance companies might need insurance themselves for the business that they write, but actually they do. We are the ones that really help get America back on its feet after a natural disaster. Data from the NCEI is used extensively in building tools that are widely utilized by both the insurance and reinsurance industry. NOAA’s National Centers for Environmental Information or NCEI provides data to insurance and reinsurance sectors to develop catastrophe models or CAT models, and to validate those models. CAT models are computer-generated models that estimate damage costs from catastrophes. They exist for many different locations and for many different perils like hurricanes, tornadoes, hail storms, floods, earthquakes, and man-made events such as terrorism
and cyberattacks. CAT models can either calculate the actual losses from a historical event or the losses from future potential disasters. The models are generated using four building blocks: event, hazard, exposure and vulnerability, and finance. NCEI data is used in the first two: event and hazard which also rely on climate and weather data to model risks. The final CAT models provide a way for insurers and reinsurers to estimate risk, price their contracts and make important business decisions. Catastrophe models are developed for each peril. For example, if an industry company wants to develop a model on tropical cyclones, they may use NCEI’s data on IBTRACS, which is the International Best Track Archive for Climate Stewardship. And that covers the entire globe. If a company is developing a model for severe convective storms, they would use a different NCEI data product such as the Severe Weather Data Inventory, which is again, a historical archive of severe weather information they can use to develop tornado and hail tracks in their model. NCEI’s data can also be used to verify the occurrence of severe weather events, for example, after a hail claim, NCEI radar and storm data can be used retrospectively to analyze whether hail occurred at a given location, and if so, its size. Insurance and reinsurance companies use NCEI data to improve their models. They’re always improving their models with the latest science, the latest data sets, and the latest insights from scientists
around the world, not just the United States. The CAT modeling industry is becoming more and more important within the insurance and reinsurance industries moving forward. There’s a lot of companies like
AON’s Impact Forecasting and other model vendors that are developing these catastrophe models to help our clients within the insurance and reinsurance industry get a better understanding of the risks associated with their commercial and residential exposures. One of the most important global weather data sets that we use is IBTRACS, and it’s really important in the sense that it includes all of the active tropical cyclone databases around the world, and it incorporates all the weather agencies from around the world as well. And we use that model for a validation perspective to understand how our models are actually performing. [Music] After every hurricane season, IBTRACS gets updated with the latest information and that gets fed into our catastrophe models, and we also use it to try to validate the actual losses that we see on the ground, and ultimately we are trying to learn from these historical experiences, and by incorporating them into our models, we ultimately get a better understanding of the true risk of hurricane, particularly in areas where they have a very low frequency of occurrence, like the New Jersey shore with Sandy. And we’ll also be able to calibrate our models so we can better understand the financial implications of these events better in the future. If NCEI data was not available and I’d have to do my same job, my job would be extremely more difficult. NCEI data is invaluable to the reinsurance industry and it would be really hard to put a tangible price tag on it. The data from IBTRACS is used in catastrophe model development. The data from storm events is used in severe convective storm models. Even daily weather is used in the financial sector for trading of weather-related risk and derivatives. So everything that’s being compiled and maintained is the foundation for so many transactions in the financial sector, that without it, we would lose literally billions of dollars of economic activity in the United States. [Music] A community that gets back on its feet faster, a family that’s gets back on their feet faster means the community gets to start to heal sooner, and that’s the real power of both insurance and the reinsurance backing it is that we can quickly get these
communities back on track and get people back to their normal lives. [Music] [Crashing waves and sea gulls]