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The Willis Research Network Newsletter

Issue No. 9 – Winter 2018

Welcome to the Winter 2018 newsletter for the Willis Research Network (WRN). This quarterly update aims to provide an insight into our latest research and activities.

Welcome to the Winter 2018 newsletter for the Willis Research Network (WRN). This quarterly update aims to provide an insight into our latest research and activities. As we wrap up yet another busy year, we selected a range of topics to illustrate how some of our existing partnerships and research streams continue to fructify, but also how the WRN is diversifying to shed some light on emerging sources of risk

Our team feels privileged to work on leading-edge science, which can support innovations for risk management and risk transfer. To help us focus on relevant topics, we maintain that constant dialog with colleagues in WTW, but also clients and partners. The events we organise throughout the year provide a great opportunity for this reality check.

Our network continues to grow, in response to emerging drivers of risk and our focus on currently uninsured risks. We have been sowing the seeds for new research partnerships on a number of fronts, and look forward to making a few announcements early next year!

In the meantime, on behalf of all of us here in the Willis Research Network team, let me extend to you all our best wishes for the festive season, and we look forward to seeing you at one of our events in 2019.

As always, please do feel free to contact us for any  feedback or queries.

WRN Visits London NERC Doctoral Training Partnerships

In early November, the WRN visited the London Natural Environment Research Council Doctoral Training Programme to talk to students about WRN activities and potential research opportunities. The London NERC DTP currently funds 142 PhD students in environmental science subjects and Willis Towers Watson is an Associate Partner; the only one from the (re)insurance sector.

There were some 50 students in attendance, mostly new starters, all excited to see how their research could have direct impact in the real world outside academia. The students were very interested in the WRN and asked insightful questions about insurance, risk modelling, and geopolitics. We have subsequently received requests from students to explore collaboration opportunities with the WRN and look forward to seeing how these might materialise.

Flooding from tropical cyclones: Freshwater vs storm surge

Flood risk is a growing concern for the U.S. insurance market. After another year of huge flood losses related to tropical cyclones, 2017 and 2018 continue to highlight that the U.S. is vulnerable to flood-related TC risks. When storms make landfall, the wind and storm surge flooding perils are key drivers of loss, but depending on the characteristics of the event, freshwater flooding, i.e. from rainfall, can drive a large proportion of the damage. Freshwater flooding not only drives substantial socio-economic impacts, but it can also affect an area stretching much further inland than the more expected impacts at the coastline. Recent Hurricanes Florence, Harvey, Irma and Matthew are clear examples of how severe the impacts of freshwater flooding from tropical cyclones can be. Over the last few years, research by our WRN partners at the Wharton Risk Management and Decision Processes Center, initially focussed on developing a hazard to loss framework for tropical cyclone related flooding, used this framework in a second phase to compare the losses from freshwater flooding and storm surge impacts. By analysing claims data from the National Flood Insurance Program, they have been able to characterise the drivers of tropical cyclone flood damage, according to location, the type of storm, the type of flooding, the NFIP flood risk zone designation, and the flood depth/duration. In a recent industry briefing (downloadable here), written in collaboration between Wharton and our Willis Re North America Catastrophe Analytics team, we summarize the findings from our second phase of research on this topic.

We are now a year into our third phase of tropical cyclone related flood damage research which will refine the comparison work to develop a sustainable service offering to the industry, while exploring further event characteristics such as pluvial vs. fluvial flooding, partly through reviewing data from Hurricane Harvey and incorporating data from third party sources.

With recent research into the impacts of climate change on rainfall within tropical cyclones and the ongoing negotiations regarding the sustainability of the NFIP, this research is proving useful for Willis Towers Watson in developing advice and a Willis Re Views of Catastrophe Risk for our clients.

GEM2018: A world resilient to earthquakes

On December 5th 2018, the WRN attended the release of the Global Earthquake Hazard and Risk Maps, by the GEM Foundation (Global Earthquake Model). The maps, which aim to create a world more resilient to earthquakes by enhancing disaster risk reduction strategies worldwide, are the result of collaboration with hundreds of public, private and academic organizations around the world. The earthquake hazard map comprises a mosaic of more than 30 national and regional hazard models, whilst the global earthquake risk map builds on that by adding national and regional exposure and vulnerability information.

Willis Towers Watson was one of the original founding members of this ground-breaking initiative and continues to be a founding member, which highlights the continued importance of their global work. Karl Jones, Head of Catastrophe Analytics, Willis Re International said, “The truly global nature and depth of the work undertaken by GEM enables us to access some of the best and most consistent data to inform our view of risk and help our clients understand theirs.

OThe event, hosted in the beautiful Chiesa dei Santi Giacomo e Filippo, located in the heart of Pavia's old town, hosted more than 100 delegates from around the world and across various sectors, and featured speakers from public and private institutions. More on the event here.

Figure 1: The GEM Global Seismic Hazard Map, v. 2018.1.

This map shows PGA with a 10% probability of being in exceeded in 50 years on reference soil

conditions (Vs30=760-800m/s).

CCRS Launches Global Risk Index at Willis Towers Watson

On 4 December the Cambridge Centre for Risk Studies, based in the Judge Business School at Cambridge University, held an event in Willis Towers Watson’s London auditorium to launch their 2019 Global Risk Index. The Index quantifies the potential impact of 22 threat types on the GDP of 279 cities worldwide. Overall, the Centre’s analysis indicates a 5.6% increase in the amount of GDP at risk from 2018. Moreover, it finds that man-made events – particularly market crash and interstate conflict – pose a far greater economic risk than natural catastrophes.

Figure 2: Complete ranking of the 22 threat types measured in the Global Risk Index. (Image

source: https://insight.jbs.cam.ac.uk/2018/impact-of-cyber-attacks-continue-to-increase-across-


The launch event itself was engagingly structured, beginning with short five-minute overviews of five core research themes: technology and space; geopolitics and security; natural catastrophe and climate; finance, economics and trade risks; and health and humanity. This was followed by a more comprehensive overview of the global risk landscape and how the Index can be used for decision making, before the event was capped off with an industry panel on innovation and ideation, seeking opportunities in risk.

As a WRN partner, the Cambridge Centre for Risk Studies continues to play an important role in our understanding of the diversity of risk. Through their series of scenario case studies, the Centre has provided in-depth analysis of a range of catastrophes, from solar storms to cyber-attacks to social unrest. The Centre’s broad range of expertise means the WRN can leverage this relationship for mutual benefit in several areas, including geopolitics and cyber security.

Tropical Cyclone research on Footprints and Rates continues at NCAR

How do I assess Tropical Cyclone (TC) risk in regions of sparse historical data? How do I validate the decay of inland TC winds in existing catastrophe models? These questions are critical to understanding the viability of re/insurance markets, and are being explored through the development of a new physically-based model to create maximum wind footprints of landfalling tropical cyclone by our WRN partners at NCAR and Willis Re International’s Model Research and Evaluation team.

The approach starts by describing the storm winds aloft using the Holland or Willoughby wind field model, and then adds the effects of coastlines, mountains, and land-use using a 3-dimensional numerical boundary layer model. The frictionally-driven response of the hurricane winds to the ground is then added using a boundary-layer model.

A set of approximately 200 global historical footprints are being generated and validated against observations to support our understanding of historical risk. Planned next steps are to couple this new simulation technology with synthetic event sets to explore future scenarios of global TC wind risk.

Annual TC occurrence rates vary substantially from one year to another. We know that natural variations in the climate system such as El Niño Southern Oscillation (ENSO) and the Atlantic Multi-Decadal Oscillation (AMO) can modulate TC rates substantially. These variations can also control intensity and regional landfall frequency.

Our latest work combines historical observations with climate model simulations to examine the effects of climate variability, such as ENSO or the AMO, on landfall rates along different parts of the U.S. coastline. Our novel approach characterizes TC rates according to typical, reoccurring weather patterns. Fluctuations in TC rates are therefore captured through the influence of ENSO and AMO on the weather patterns. This emphasis on the overall environmental conditions maximizes where we have the highest skill in seasonal forecasts.

A highlight of this approach is that it captures the different ‘flavours’ of El Niño through the differing weather patterns. This is an advance on previous approaches that assume fixed relationships between ENSO or AMO and TC rates. This project builds on previous TC activity rate adjustments to give more detailed guidance relevant to the coastal impacts of hurricanes from wind, rain and storm surge for our Willis Re North America’s Catastrophe Analytics team.

Resilience bonds as a way for financing supply chain resilient infrastructure projects

In today’s complex and dynamic environment, supply chains are encountering unforeseen catastrophes and slow bounce back after catastrophic disruptions. Critical nodes and links in a supply chain are sensitive to ripple effects, which will cause a connection failure to entities. Aside from considering approaches and tools for supply chain resilience, we are looking beyond the label and consider the financing for resilient projects. Resilience bonds, as an alternative financial tool, provide a reliable mechanism to transfer catastrophic disruption risks to the capital market, whilst generating extra rebates to invest in the development of the resilient project.

The WRN invited Francesca Medda, Professor of Applied Economics and Finance at the University College London (UCL), and PhD candidate Ying Song to present on the latest research on supply chain resilience bonds, and the pricing mechanisms under different resilience levels, maturities and thresholds.

For more information on any of the research mentioned above or other WRN projects, please get in touch with our team.

Or you can contact the whole team through wrn@willistowerswatson.com.

Check out our website www.willisresearchnetwork.com

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Upcoming Events

Willis Research Network Spring Seismic Seminar
13th February 2019, London, U.K.

More Details To Follow

SC Congress London
21th February 2019, London, U.K.

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