Aon announces a new academic collaboration between Impact Forecasting team

Re/insurance broker Aon has announced a new collaboration between its Impact Forecasting team, the University of California, Merced and the University of California, Los Angeles to implement the latest climate change science and research into Aon’s US wildfire catastrophe model.

The academic collaboration will support the development of climate-conditioned fire danger indices through research on changes to future fire weather behaviour in the US while implementing data from CMIP6 – the latest global climate model output.

These indices will then serve as inputs to drive the creation of climate-conditioned wildfire event catalogues, which are considered a required metric for properly incorporating climate science into a catastrophe modelling framework.

The climate conditioned catalogs, along with Impact Forecasting’s updated baseline wildfire risk model, are scheduled to be released in 2023.

Wildfire had long been considered a ‘secondary’ peril – where frequency rather than severity drove overall risk – but over the past decade a significant increase in volatility and insured losses in the U.S. has changed this perception

Dan Dick, Aon’s Global Head of Property Analytics

The insights from this collaboration and Impact Forecasting’s baseline and climate-conditioned wildfire models will help re/insurers make better decisions on underwriting, pricing and portfolio management.

Specific business use cases for the collaboration include the identification of high-risk areas, targeting where and how to invest in resiliency measures, development of long-term climate change strategies for physical risk, and reporting to external stakeholders, such as regulators and rating agencies.

This is a great example of how private industry and academia can learn from, and improve, each other’s work.

Industry partners get to leverage the latest and most up-to-date science, reinsurers get the experience of translating academic findings into real-world applications that directly affect decision-makers and the general public.

by Nataly Kramer