New Underwriting Toolkit Provides Instant UK Property Risk Assessment

California –June 23, 2009–Risk Management Solutions (RMS) today announced the launch of its Underwriting Toolkit, designed to help underwriters and pricing managers accurately assess and rate risk for individual buildings impacted by key UK perils – flood, storm surge (coastal flooding) and windstorm. The Toolkit allows property risk to be viewed in a map and quantified in seconds.

In the current economic climate, where investment income has declined, underwriters are under even greater pressure to ensure their underwriting practices are commercially sustainable. For a peril like flood, the risk varies dramatically within a postcode, making it crucial to accurately assess the impact of a property’s location, building type, and construction. The RMS® Underwriting Toolkit provides residential and commercial property underwriters with metrics – including average annual loss and return period flood depths and wind speeds – which can be easily incorporated within their underwriting workflows for risk screening and rating. These metrics are derived from RMS’ catastrophe models and calculate the risk from both frequent and extreme events.

According to Underwriting Toolkit analysis, flood losses for houses within the same postcode can vary dramatically depending on their exact location, especially when considering flooding from both major rivers and surface water. Taking the scenario of a house insured for £125,000 located at the bottom of a hill, losses from 1.5 meters of major river flooding could be as much as £16,000, while an identical house in the same postcode situated half way up the hill would incur losses of around £500 from surface water flooding, and one at the top would suffer no damage. Despite their various locations on the hill, the fact that the houses are within the same postcode and of equal value means the risk would traditionally be considered the same and they would be assigned the same flood rate.

The RMS® Underwriting Toolkit allows insurers to more accurately distinguish between risks by providing rating and risk assessments at a higher resolution than postcode level. “Depending on an insurer’s risk appetite, rather than declining all business at significant risk of flooding they now have the tools to determine which are at the most extreme risk, or where flood water exceeds the level where simple flood defenses like sandbags become less effective,” said Elizabeth Couchman, senior product manager at RMS.

Risk screening
By including property-specific assessments and embedding more robust underwriting rules within an automated underwriting system, the Underwriting Toolkit has also shown to reduce the number of quotations referred to underwriters by two-thirds or more. This is because only a few properties within a postcode are likely to be at risk of flooding.

Both the Pitt Review and the Government’s draft of the Flood and Water Management Bill propose that better tools are needed for assessing flood risk and identifying properties at risk outside of the major river floodplains. “The Underwriting Toolkit examines all sources of flooding and includes risk assessment maps for events ranging from once every 10 years on average, to more extreme scenarios which occur around once every 1,000 years,” commented Ms. Couchman. “By having a better handle on a property’s risk profile, underwriters can decide how much business to write in specific areas, and ensure they receive enough premium income to adequately cover their risks.”

The RMS® Underwriting Toolkit can be accessed via a Microsoft Excel® interface with built-in mapping, or integrated directly into insurers’ underwriting systems using webservices.