National regulators have approved the Colombian earthquake model of AIR Worldwide, a Boston-based catastrophe modeling company. With the green light from the Superintendencia Financiera (Superfinanciera) in Bogotá, insurers throughout Colombia can now use the company’s model to help manage their earthquake risk and insurance exposure.
Rob Newbold, executive vice president at AIR Worldwide, is encouraged by the approval and sees this as another positive step toward improving resiliency and disaster risk management in the region. He noted that Colombia is now the second country in South America, after Peru did so in December 2015, to approve the firm’s models.
“To continue to protect the strong growth of South America’s insurance markets, regulators are largely moving to establish model-based capital requirements more reflective of the actual risk faced by the region,” said Newbold.
AIR recently updated its Colombia model to improve the accuracy of loss predictions due to ground shaking, tsunami, and liquefaction, says the company. New damage assessments, incorporating the latest scientific data, are also now available for high-value industrial facilities, builder’s risk, and public infrastructure. In addition, the upgrades also offer the ability to model a current-day assessment of historical events, including the 1999 earthquake that devastated the city of Armenia in central Colombia.
Especially with the recent improvements, AIR Worldwide believes the model will help the Colombian insurance industry meet solvency requirements recently enacted by the government. “The AIR model can now be used in Colombia to better manage risk and satisfy regulatory requirements that base capital reserves on probabilistic loss estimates,” said Newbold. He added that he thinks the model can give “companies a distinct advantage in preparing for the next earthquake in the region.”