Over the last decade, a noteworthy increase in the frequency and severity of severe thunderstorm losses across the central and eastern United States has created a lack of profitability for carriers exposed to these perils. The impact has been amplified by outdated and antiquated catastrophe models lacking the ability to properly assess the current risk. Guy Carpenter’s Severe Thunderstorm Risk Magnitude index (SToRMi) provides a transparent approach to severe thunderstorm hazard assessment to afford clients an independent and current viewpoint of risk.
Development
SToRMi uses the Guy Carpenter proprietary OmniCAT risk score service, which provides differentiated severe thunderstorm risk perspectives, hail/wind/tornado hot spots, statistical significant trends in risk over time, and sub-peril bifurcation of historical thunderstorm activity. The innovative approach behind the development of SToRMi provides an up-to-date product that quantifies, by county, the relative severe thunderstorm risk across the United States. Incorporating the frequency and severity of the three sub-perils associated with severe thunderstorm (hail, tornado and straight-line wind), the index acts as a supplement to balance known shortcomings of catastrophe models. Underpinning the risk assessment is a curated view of storm data, supplemental bias-free National Weather Service datasets and academic viewpoints on extreme value theory regarding hail outcomes. Given the highly localized nature of thunderstorm activity and the limited availability of high-quality data to inform risk, the transparency in the risk score approach of SToRMi affords insurers more visibility in fully owning their view of severe thunderstorm risk. SToRMi is updated annually, providing users with a view of risk that is consistent with that of the current risk landscape.
Delivery Mechanisms & Use Cases
Being built on the backbone of the OmniCAT risk score service affords broad applicability of SToRMi across a range of Guy Carpenter technologies. SToRMi has proved to be increasingly valuable for carriers as they manage their severe thunderstorm risk. Actionable business outcomes that arise out of the results of SToRMi aid carriers in portfolio management and peak zone accumulation, facilitate rate making, support strategic growth and improve risk selection. SToRMi has also been applied in recent predictive modeling studies, providing a significant amount of predictive lift when assessing future claim activity. Guy Carpenter offers SToRMi via a suite of spatial analytics products, including GC Advantage Point® and GC Mosaic®. SToRMi is also available through API services that afford integration of the risk score into point-of-sale applications.
Future Plans
Guy Carpenter is partnering with Northern Illinois University to enhance SToRMi by incorporating trends in hail and tornado activity over time. In specific regions of the United States, the atmosphere has trended in a statistically significant manner to being more capable of producing either large hail in excess of 2 inches and/or violent tornadoes of EF-2 intensity or higher. These data will augment the SToRMi analysis to give carriers a perspective on whether there is a discernable trend over time in risk that requires further assessment. Actionable outcomes on these data include the potential to assess trends in favorable atmospheric conditions relative to peak exposure concentrations, rating actions, tiering of limits or deductibles, and the potential for more rigorous assessment of primary and secondary location data characteristics to understand mitigating influences on significant hail and wind events.