Aon Re provides insight into earthquake loss potential

Aon Re recently developed a comprehensive Earthquake Viewing Guide following the success of its Hurricane Viewing Guide, which was utilized during the 2004/2005 hurricane seasons.The viewing guide provides a range of potential loss outcomes based on possible earthquake events throughout the U.S.. The guide provides exposure summaries and probable maximum-loss outcomes for given ranges of magnitudes in earthquake-prone regions, which will allow insurance companies to assess earthquake loss potential. Aon says the Earthquake Viewing Guide can also assist in making decisions regarding exposure accumulation, reinsurance capacity decisions and capital utilization.Jeremiah Konz, vice president and managing director, Aon Re Services, says the Hurricane Viewing Guide has already successfully helped insurers quickly determine potential loss scenarios without the need to re-run catastrophe models. Dan Dick, executive vice president, Aon Re Services, says while both the Earthquake and Hurricane Viewing Guides use the potential loss severity as determined by various catastrophe models, they remove the underlying frequency which allows the user to make decisions by determining how severe the loss could be given a certain event occurs. “The past two hurricane seasons have put the various catastrophe models under a lot of scrutiny,” Dick says. “These guides remove one of the largest areas of model uncertainty from the equation, event frequency.”