AIR Worldwide : Munich Re Licenses AIR's Updated Crop Insurance Models for the
United States and China
For immediate release:
Munich Re Licenses AIR's Updated Crop Insurance Models for the United States
BOSTON, Aug. 7, 2013 - AIR Worldwide (AIR) today announced that it has updated
its Multiple Peril Crop Insurance (MPCI) Models for the United States and
China. These are weather-based models that estimate underwriting gains and
losses based on crop yield probabilities in the context of current conditions.
Munich Re, a leading global reinsurer, has licensed the updated models to
enhance its risk management capabilities for its catastrophe-exposed
"The risk associated with agricultural insurance portfolios is extremely
complex, which makes them challenging for insurance and reinsurance carriers
participating in the U.S. MPCI program," said Lambert Muhr, senior underwriter
for agricultural risks, Munich Re. "The ability to analyze the sensitivity of
agricultural portfolios to different yield and price volatility scenarios is
available in AIR's new model. That represents a major advantage given the
recent changes in overall premiums, premium rates, and other uncertainties
affecting this market."
The MPCI Model for the U.S. accounts for the latest Standard Reinsurance
Agreement (SRA) released by the U.S. government to estimate retained losses
for the crop insurer. With the Version 15 release of AIR's CATRADER^® system,
the model was also enhanced to include multiple price volatility catalogs that
allow for more refined reinsurance analysis given increasing uncertainty in
commodity market prices. Another update is the ability for the model user to
modify industry premiums by adjusting default values as the U.S. government
changes premium rates of the key program crops. Finally, the historical event
catalog has been updated to incorporate all years from 1974 through 2011, and
additional reporting tools have been added for easy manipulation and
visualization of model results.
The MPCI Model for China has been updated to include the latest policy
conditions used in the market and an updated database of industry exposure.
"Weather is the predominant driver of agricultural losses in China, and AIR's
crop model properly accounts for weather events at a very high resolution,"
said Karl Murr, head of agriculture, Munich Re. "The model provides a holistic
view of our risk and will be a central part of our China agricultural
portfolio risk assessment process."
AIR's MPCI Model for the United States was first released in 2007. Currently,
it is the leading independent pricing model for the crop reinsurance industry.
Last year, the majority of the traditional crop reinsurance transactions were
analyzed using the AIR U.S. MPCI Model. Crop insurance companies are using the
AIR U.S. MPCI Model results to assess policy risk and allocate policies to the
various risk-sharing funds available in the SRA program as part of their fund
designation process. The model is also being adopted by investors in the ILS
crop risk transfer markets.
AIR released the industry's first Multiple Peril Crop Insurance Model for
China in 2011. It provides a fully probabilistic approach for determining the
likelihood of losses to the country's major crops of corn, cotton, rapeseed,
rice, soybeans, and wheat. The model employs AIR's advanced Agricultural
Weather Index(TM) to capture the significant effects that weather-related
perils have on each crop during different growth stages. It explicitly models
damage resulting from various weather perils, including drought, floods, and
typhoons, which are the leading causes of crop loss in China. The model
accommodates China's complex policy conditions, which vary by crop type,
peril, and province.
"The AIR crop models for the United States and China address significant
weaknesses found in traditional crop models," said Dr. Oscar Vergara, business
development manager at AIR Worldwide. "To provide the most accurate
probabilistic estimate of potential crop portfolio losses, they account for
the effects of weather, technology improvements over time, changes in policy
types and their market penetration, and changes in government protection
About Munich Re
Munich Re stands for exceptional solution-based expertise, consistent risk
management, financial stability and client proximity. This is how Munich Re
creates value for clients, shareholders and staff. In the financial year 2012,
the Group - which combines primary insurance and reinsurance under one roof -
achieved a profit of €3.2bn on premium income of around €52bn. It operates in
all lines of insurance, with around 45,000 employees throughout the world.
With premium income of around €28bn from reinsurance alone, it is one of the
world's leading reinsurers. Especially when clients require solutions for
complex risks, Munich Re is a much sought-after risk carrier. Its primary
insurance operations are concentrated mainly in the ERGO Insurance Group, one
of the major insurance groups in Germany and Europe. ERGO is represented in
over 30 countries worldwide and offers a comprehensive range of insurances,
provision products and services. In 2012, ERGO posted premium income of
€19bn. In international healthcare business, Munich Re pools its insurance and
reinsurance operations, as well as related services, under the Munich Health
brand. Munich Re's global investments amounting to €214bn are managed by MEAG,
which also makes its competence available to private and institutional
investors outside the Group.
About AIR Worldwide
AIR Worldwide (AIR) is the scientific leader and most respected provider of
risk modeling software and consulting services. AIR founded the catastrophe
modeling industry in 1987 and today models the risk from natural catastrophes
and terrorism in more than 90 countries. More than 400 insurance, reinsurance,
financial, corporate, and government clients rely on AIR software and services
for catastrophe risk management, insurance-linked securities, detailed
site-specific wind and seismic engineering analyses, and agricultural risk
management. AIR is a member of the Verisk Insurance Solutions group at Verisk
Analytics (Nasdaq:VRSK) and is headquartered in Boston with additional offices
in North America, Europe, and Asia. For more information, please visit
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information contained therein.
Source: AIR Worldwide via Thomson Reuters ONE
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