Karen Clark & Company (KCC) is pleased to announce the release of the US Severe Convective Storm (SCS) Model Version 4.0. The new model expands on the advanced physical modeling techniques KCC has introduced for this most important emerging peril.

SCS losses dominate annual weather-related insured property losses in the US. The older catastrophe modeling technology still used by many reinsurers and ILS investors does not provide credible loss estimates for severe convective storms and these models tend to produce large swings in loss estimates. KCC scientists built a physics-based model to consistently and accurately capture the complexities of these storms.

The KCC model is based on high-resolution 4D physical models of the atmosphere, rather than statistical extrapolations of historical data. KCC scientists leverage a physics-based approach that incorporates all atmospheric variables that drive SCS to produce high-resolution footprints for hail, tornadoes, and straight-line winds.

While the overall loss estimates have not changed significantly, with the release of Version 4.0, KCC scientists have further enhanced location-level loss estimates, particularly for the hail sub-peril.

The KCC SCS advanced modeling technology has been validated and proven accurate with tens of billions of dollars of insurer claims data. The model provides daily high-resolution hail and tornado/wind footprints that insurers use to estimate their claims and losses by day and event and aggregated by month and year. Through the KCC LiveEvents process—which also provides industry losses—(re)insurers can verify for themselves the accuracy of the model.

“The KCC SCS model provides the accuracy and stability that reinsurers and ILS investors require to confidently offer capacity for this peril, which dominates weather-related claims in the US,” said Karen Clark, KCC Co-Founder and CEO. “Along with traditional applications such as pricing and underwriting, the KCC SCS model provides the mechanism for innovative modeled loss trigger (MLT) transactions—hybrid reinsurance contracts that sit between indemnity and pure parametric deals.”

The value of the MLT is it offers the same level of transparency and objective payouts as pure parametric contracts but with much less basis risk to insurers.

The updated model also includes additional secondary building characteristics that further enhance the accuracy of the loss estimates for both the hail and tornado/wind sub-perils and explicit support for Roof Actual Cash Value endorsements.

“As with all KCC models, changes to the loss estimates are fully transparent and serve to fine tune the losses by geography and other location-specific variables,” said Glen Daraskevich, KCC Senior Vice President. “Because of more advanced and modern technology, KCC model updates do not produce volatile changes in loss estimates and are not disruptive to pricing and underwriting decisions and strategies.”

About Karen Clark & Company

Karen Clark & Company (KCC) provides advanced models, innovative software, and comprehensive consulting services for deeper insight into climate, weather, and catastrophe risk. KCC professionals are globally recognized experts in catastrophe modeling and risk management who work with company executives to enhance business strategies, competitive advantage, and financial results. KCC models cover tropical cyclones, extratropical cyclones, severe convective storms, winter storms, wildfires, floods, and earthquakes in over 80 countries. For more information, please visit www.karenclarkandco.com.

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