# Aon launches new catastrophe model to manage the risk of Iceland’s most disastrous peril: Earthquake
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2016-10-19
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: New Iceland Earthquake Model: Impact Forecasting
Meta Description: Collaboration with Iceland Catastrophe Insurance and Aon Benfield's team to estimate earthquake impact, based on latest local scientific knowledge.
URL: https://financedigest.com/aon-launches-new-catastrophe-model-to-manage-the-risk-of-icelands-most-disastrous-peril-earthquakehtml

![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/earth-globegydescso-1736844435325-compressed.jpg)

Collaboration with Iceland Catastrophe Insurance incorporates latest science

[Impact Forecasting](http://www.impactforecasting.com), Aon Benfield’s catastrophe model development team, has developed a new catastrophe model for Iceland to estimate the financial impact of earthquakes. [Aon Benfield](http://www.aonbenfield.com) is the global reinsurance intermediary and capital advisor of Aon plc (NYSE:AON).

Iceland is the most earthquake prone region in Northwest Europe, with the peril accounting for 83% of catastrophe losses in the country over the last 20 years.  Recent major loss history, estimated at present day values, includes M6.5 earthquakes in 2000 causing ISK7.8 billion (EUR53.2 million) of insured loss and a M6.3 earthquake in 2008 resulting in with ISK13.8 billion (EUR92.4 million) of insured damage [\[1\]](#_ftn1).

Developed in collaboration with the Iceland Catastrophe Insurance (ICI), the goal of the model is to bring the most-up-to-date view of the risk by incorporating the latest local scientific knowledge, understand the uncertainty in its loss estimates and create a customised model that reflects the uniqueness of its portfolio and loss history.  Notably the damage curves in the model, which show the correlation between hazard intensity and loss, are based on detailed high quality loss observation data from the past two major events in Iceland.

The seismic source zones were developed in collaboration with Professor Pall Einarsson from the University of Iceland. These are based on the local geology and tectonics including a catalogue from the Icelandic Meteorological [Office of recorded earthquakes back](https://www.financedigest.com/google-mandates-workers-back-to-silicon-valley-other-offices-from-april-4.html "Google mandates workers back to Silicon Valley, other offices from April 4") to 1926 and historical earthquakes back to 1700.

In addition, the model is implemented in [ELEMENTS](http://bit.ly/if_elements), Impact Forecasting’s catastrophe modelling platform, to estimate and visualise the potential earthquake losses and to quantify the uncertainty. The platform also [offers the potential](https://www.financedigest.com/future-market-insightss-detailed-report-on-cat-litter-market-offers-projections-of-potential-impact-of-corona-virus-outbreak.html "Future Market Insights’s Detailed Report on Cat Litter Market Offers Projections of Potential Impact of Corona Virus Outbreak") for multi-peril risk assessment.

HuldaRagnheiðurÁrnadóttir, CEO of Iceland Catastrophe Insurance, commented: “The ICI has increasingly emphasised the importance of assessing [insurance risk](https://www.financedigest.com/improving-risk-management-in-the-insurance-industry.html "Improving risk management in the insurance industry") based on recent local scientific advancements. The new [model has enabled us to further grasp the extent of the risk](https://www.financedigest.com/insurers-must-reimagine-traditional-risk-models-to-adapt-to-climate-change.html "Insurers Must Reimagine Traditional Risk Models to Adapt to Climate Change ") in relation to our own portfolio, while delivering enhanced information to reinsurers for use at the 2017 renewal.”

Goran Trendafiloski, head of earthquake development at Impact Forecasting, added: “It was critical to [develop a modelling solution that was based on the loss history and seismicity of the country](https://www.financedigest.com/britain-launches-trade-system-for-developing-countries.html "Britain launches trade system for developing countries"). Going one step further beyond the probabilistic modelling, we also [developed a deterministic model to understand specific events such as the major recent](https://www.financedigest.com/most-recent-development-report-on-centrifugal-chiller-market-to-witness-exponential-rise-in-revenue-share-during-the-forecast-period-2021-2031.html "Most Recent Development Report On Centrifugal Chiller Market To Witness Exponential Rise In Revenue Share During The Forecast Period (2021-2031)") earthquakes. Furthermore, the model is not limited to proactive [risk management](https://www.financedigest.com/strategies-banks-use-to-manage-liquidity-risk.html "Strategies Banks Use to Manage Liquidity Risk") but can also be used to provide insights for handling claims and managing resources in the event of an earthquake.”

The model can be accessed by any re/insurance company.


---
This blog is powered by Superblog. Visit https://superblog.ai to know more.
---