Fenchurch develop "in house" natural catastrophe model for Property

The market has evolved a lot in the last 25 years, prior to this period there was very little ability to model large property schedules apart from either a manual process or a filter basis using excel. The knowledge that could be extracted from the schedule was exactly the same for both brokers and underwriters. It wasn’t possible to overlay the data with any third party data, which lead to a lot of assumptions about the risk. This lead to past experience and gut feeling being applied as the driver in qualifying the account.

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Then came RMS (Risk Modelling Service) and several other similar models which allowed Underwriters deeper understanding of a schedule of values and actuarial tools such as rating and aggregation of values in target nat cat zones. This was a real revelation for underwriters especially the zonal aggregation which then took the guessing out of whether an underwriter was overwhelmed in a peak zone or not.

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All this process/system change lead brokers to lose control of knowing their account, what were the drivers in terms of weather and catastrophe exposures ? They probably thought they could  grasp by looking at the schedule ! However, additional weather and catastrophe patterns starting occurring Severe Convective Storms (SCS), Wildfire, Hail and Winter Weather. On a large schedule it would be impossible to know what the real exposures were.

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In 2024 Fenchurch decided that we needed an internal tool, to provide us with insights and to help us understand the exposures to make sure we are on the same level as the Underwriters, especially when entering into negotiations with the market. The plan was to know more about the cat and fire exposures than they did.

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So, we set about building an internal workbook, which would provide us with a full 360 set of risk information. We utilised publicly available data that was generated from Government agencies, past aggregation information commonly used in the market place and trying to think of all things that Underwriters normally ask us about the composition of the risk (COPE), which we could automate.

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As usual with this project it grew from initially an exposure workbook to a 360 review sheet that can provide us with the ability to review the fire and cat exposure, as well as being able to price programme structures and as a comparison tool to other programmes. The model can handle Multi National accounts with hundreds/thousands of locations.

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The final model has become a key part of our process which has allowed us to quickly qualify whether we will be able to compete with the expiring or required renewal terms.