GIS software applications for catastrophic risk management in the insurance and reinsurance industry

Some Examples of the use of GIS Software Applications for Risk Management in the Insurance and Reinsurance Industry


Fig 1: A typical wind speeds conour map (windfield) for a storm

The following five examples, which illustrate the use of GIS software applications for risk insurance and reinsurance industry, will be discussed in the subsequent sections.

• Multi-peril exposure analysis
• Wind hazard assessment of the insured sites
• Intranet based underwriting solution for flood risk
• Strategic capital allocation by an insurance company
• GIS software applications for study of terrorism risk

Multi-peril Exposure Analysis
To study the catastrophe-exposed business of an insurance company (called the “exposure”), simple GIS-based tools are used. The data about the insured locations and the associated policies, as made available by the insurance companies, can be imported into such a tool. A basic use of this tool could be to simply thematic display of the overall exposure, in which the colors are assigned to each geographic unit based on the insured value. For further analysis, the break-up of this total value of exposure by line of business (say, residential, commercial and industrial), or by building construction class, can be computed. For locations in earthquake prone zone, their proximity to fault zones could be studied. For locations exposed to cyclone risk, a study of how the exposure is distributed with respect to the distance from the coastline can also be done. In a nutshell, a GIS software application can be developed to enable a quick import, display, thematic mapping and analysis of the exposure data. It can facilitate in assessing the areas of exposure concentration, and this information can be used for further decision-making.

Wind Hazard Assessment of the Insured Sites
For the wind-related perils (cyclones, hurricanes, windstorms, and typhoons, referred in this paper as “windstorm”), the important spatial aspects are track of the windstorm, and the “windfield” associated with it. The windfield defines the spatial distribution of the wind speeds in the vicinity of the track. The track, as well as the windfield, are dynamic in nature, and have a spatial (space-dependent) as well as a temporal (time-dependent) component. Use of GIS software applications allows a powerful modeling of these events and the spatial distribution of risk associated with them. Such applications can enable automated and fast computations of wind speeds at any given site (defined through a set of coordinates) due to a single or a set of storms passing near to that site. Shape files (ArcInfo files) corresponding to the storms can be used as input for the wind field (the distribution of wind speeds) calculations, to generate the wind field parameters for each site affected by the selected storms. The power of GIS can also be used to plot the wind speed contours. A set of such contours, prepared for some defined time interval during the passage of the storm, can be superimposed over the locations layer, and hence, the pattern of wind speeds around the desired location can be observed at various time steps. Such applications can be used as input in the overall framework of risk-modeling for wind-perils