Press Releases
Karen Clark & Company’s RiskRover™ Technology Selected by INTEGRAND to Streamline Field Inspections
BOSTON, MA, April 12, 2010 – Karen Clark & Company, independent experts in catastrophe risk, catastrophe models, and catastrophe risk management, today announced that INTEGRAND Assurance Company has licensed its RiskRover™ mobile technology for automating loss control inspections. INTEGRAND will use RiskRover™ to collect detailed information on each commercial property it insures via handheld "smartphones."
Executives at INTEGRAND, a Puerto Rico-based insurance company, cited RiskRover™’s ability to seamlessly integrate detailed information collected in the field with internal databases as a key factor in their decision to license the product.
"It is a priority to provide our underwriters and decision makers with quick access to accurate information," said Victor J. Salgado Jr., President and CEO, INTEGRAND. "RiskRover™ allows us to improve the efficiency of our loss control process by capturing data and photographs electronically in the field, and having that information quickly linked directly into our proprietary data systems."
RiskRover™ integrates several processes performed by inspectors into a single handheld device. It records address information and GPS coordinates, collects detailed information about each location, and captures photographs. The information is instantly transmitted to an online database for immediate accessibility. Since all information is stored in a database format, RiskRover™ facilitates easy data extraction into catastrophe models, company pricing systems, and other analytical tools.
Recognizing that companies have unique information needs and different information systems, RiskRover™ is a highly flexible product that can be customized to individual client requirements. This flexibility was essential for INTEGRAND, allowing Karen Clark & Company consultants to tailor RiskRover™ to work with INTEGRAND’s sophisticated data system, which centralizes proprietary company information in a single location.
"We are delighted INTEGRAND has chosen RiskRover™ for its loss control program," commented Glen Daraskevich, Senior Vice President, Karen Clark & Company. "We are pleased to be working with innovative companies such as INTEGRAND to implement technology that not only brings productivity gains, but also enhances risk selection, pricing and catastrophe risk management."
About INTEGRAND
For over 35 years INTEGRAND has provided its Puerto Rico clients with innovative property and casualty insurance solutions. Since its inception, INTEGRAND has been backed by quality reinsurers and high solvency and received the highest financial condition ratings from A.M. Best. The company’s name embodies its core principles: integrity, professionalism, financial strength, service excellence and warmth.
Karen Clark & Company Issues Report Examining Performance of Near Term Hurricane Models
2nd Annual Study Finds Near Term Models Cannot
Credibly Project Insured Losses
Study Also Examines Purported Hurricane Frequency Paradox
BOSTON, MA, January 20, 2010 – Karen Clark & Company, independent experts in catastrophe risk, catastrophe models, and catastrophe risk management, today released its second annual report on the performance of near term hurricane models. The report finds the models, designed to project insured losses in the United States from Atlantic hurricanes for the five-year period ending in 2010, have significantly overestimated losses for the cumulative 2006 through 2009 seasons. Last year’s report found the same for the 2006 through 2008 seasons.
Near term models were introduced by the three major catastrophe modelers in 2006, following the destructive 2004 and 2005 hurricane seasons. Each of the companies, AIR Worldwide (AIR), EQECAT and Risk Management Solutions (RMS), initially projected insured loss levels at least 35% above the long-term average for the period 2006 through 2010. AIR lowered its figure to approximately 16 percent in 2007. EQECAT has made only minor adjustments to its original estimate of loss increases of between 35 and 37 percent. RMS introduced modifications to its model in 2009, but still predicted losses at 25 percent above the long-term average.
Assuming long-term average annual insured hurricane losses of $10 billion per year, these figures translate into cumulative insured losses for 2006 through 2009 of $48.8 billion, $54.5 billion, and $54.6 billion respectively, for the AIR, EQECAT and RMS models. The actual cumulative losses were $13.3 billion, far lower than the model predictions, and only one third the long-term cumulative average of $40 billion. The 2009 Atlantic hurricane season was below average in the number of named storms, hurricanes and major hurricanes, and was the lowest frequency year since 1997.
"This latest study further supports our previous findings that a short time horizon is not sufficient for credibly estimating insured losses from hurricanes,” said Karen Clark, President and CEO, Karen Clark & Company. “Hurricane activity changes markedly year to year, and the 2004 and 2005 seasons have proven not to be harbingers of a continuing trend. Given all the uncertainties, near term projections do not have sufficient credibility to be used for important insurance applications such as product pricing and establishing solvency standards."
Catastrophe models were introduced to the insurance industry in the late 1980s. By utilizing many decades of historical data, the models gave insurance companies better estimates of what could happen and more specifically, the probabilities of losses of different sizes on specific portfolios of insured properties. Use of the near term models by insurance and reinsurance companies, which are based on short term assessments of the frequencies of hurricanes, was a radical departure from the way in which catastrophe average annual losses (AALs) and probable maximum losses (PMLs) are typically derived.
The report notes that hurricane activity is influenced by many climatological factors, many of which are known, but some unknown, by scientists. There are complicated feedback mechanisms in the atmosphere that cannot be quantified precisely even by the most sophisticated and powerful climate models. The report recommends that insurers, reinsurers and regulators evaluate the efficacy of the near term hurricane models in light of this uncertainty.
"Catastrophe models are powerful, broad based tools that are very good for particular applications,” commented Ms. Clark. “However, model users must recognize that there can be a very wide range of estimates associated with a given model metric, such as average annual loss. Model users should be ‘thinking outside the black box,’ focusing more on understanding the range of estimates rather than automatically relying on one or two highly uncertain point estimates. This will facilitate more transparent and robust catastrophe risk management decision making."
The Hurricane Frequency Paradox
The Karen Clark & Company report also addresses what has been termed the Hurricane Frequency Paradox.
Some scientists suggest there has been an increase in Atlantic tropical activity, based on growth in the tropical cyclone counts since data was first compiled in the late 19th century. Paradoxically, this apparent increase has not resulted in an increase in hurricane landfalls in the United States. If in fact there are more Atlantic tropical cyclones, then over the past four decades the percentage of storms making landfall has declined to about 60 percent, compared to an average of about 75 percent prior to 1965.
Researchers at the National Oceanic and Atmospheric Administration (NOAA) have now concluded that the increase in annual storm frequency is in large part attributable to improvements in observational technology leading to the increased detection of tropical storms and hurricanes. This is particularly true for short duration storms originating in the Eastern Atlantic, far removed from potential landfall. Prior to the introduction of satellite technology, such storms were dependent upon oceangoing ships for detection.
"According to the most recent NOAA study, the occurrence of short-lived Atlantic tropical storms and hurricanes, those surviving no more than two days, has increased dramatically over time, while the number of longer-duration storms has not,” said Ms. Clark. “If one estimates the number of storms prior to 1970 that were not detected, there appears to actually be a slight decreasing trend in storm frequency. In addition, we have not seen an increasing trend in hurricane losses when historical losses are normalized to current exposure values."
The Karen Clark & Company report, Near Term Hurricane Models – Performance Update, is available at www.karenclarkandco.com.
Karen Clark & Company Introduces Thinking Outside the Black Box™ Catastrophe Management Operational Review
BOSTON, MA, December 8, 2009 – Karen Clark & Company, independent experts in catastrophe risk, catastrophe models, and catastrophe risk management, today announced the introduction of a new service, Thinking Outside the Black Box™ Catastrophe Management Operational Review. The Review provides a comprehensive examination of a company’s use of catastrophe models and the integration of catastrophe loss analytics into risk management operations.
Catastrophe models have become an essential component of the risk management process of most insurers. Many companies, however, don’t fully understand the uncertainty inherent in the models, or how to best utilize the models in light of this uncertainty. The Catastrophe Management Operational Review helps insurers develop better and more holistic risk assessment and risk management processes. It addresses all essential components of sound catastrophe management including data management, catastrophe modeling, underwriting, pricing and risk management.
"Insurers frequently use catastrophe models in isolation to determine probable maximum loss estimates, and model results may not be properly integrated into the operations of the organization,” said John Tierney, Senior Vice President, Karen Clark & Company. “In addition, point estimates from the models are subject to high volatility and instability, making it difficult to develop a robust framework for integrating catastrophe information into risk management decisions. The Catastrophe Management Operational Review enables an insurer to develop a state-of-the-art catastrophe risk management program that is both effective and robust."
Among other benefits, the Review helps insurers determine whether they:
- Accurately collect information pertaining to the exposure associated with new business
- Utilize appropriate and robust analytic tools as applied to their book of business
- Effectively use underwriting processes to accept business and control aggregate exposure
- Properly reflect catastrophe exposure in the development of rate indications and rating plans
- Appropriately reflect catastrophe exposure in determining target levels of profitability
"We are very excited to be providing this new service because the Thinking Outside the Black Box™ Catastrophe Management Operational Review can enhance profitability through pricing and underwriting actions," said Karen Clark, President and CEO of Karen Clark & Company. "It goes well beyond catastrophe modeling and provides information companies can use to accelerate growth while controlling reinsurance costs and maintaining or enhancing financial strength ratings."
Karen Clark & Company Executive Briefing to Provide Guidance on Use of New U.S. Earthquake Models
BOSTON, MA, September 14, 2009 – Karen Clark & Company, independent experts in catastrophe risk, catastrophe models, and catastrophe risk management, today announced a new Executive Briefing, “Implementing the New U.S. Earthquake Models: Look Before You Leap.” This one-and-a-half hour briefing, designed specifically for boards of directors and insurance company senior executives, provides guidance on how to interpret and use the new models.
In early August, the two major catastrophe modeling companies, AIR and RMS, within a day of one another announced releases of new earthquake models for North America. The new model versions, based partly on the 2008 USGS National Seismic Hazard Maps, produce significantly reduced loss estimates for most regions of the U.S. While the amount of reduction varies by model, by region, and by type of business, most companies with significant earthquake exposure will see large reductions in their model loss estimates. Implemented as is, these changes will have major implications for company risk management decisions, including earthquake underwriting, pricing, and reinsurance purchasing.
The Executive Briefing answers the following questions in a format appropriate for senior executives:
- What are the new models based on?
- How much faith can I put into the new models and how much confidence can I place in the new model loss estimates versus previous loss estimates?
- How can the changes in my loss estimates be tested?
- Are the model loss estimates likely to go back up, and if so, when?
- How should I use the models to get a more robust understanding of my company’s earthquake risk?
Any company that implements a new model without thoroughly testing and understanding what’s behind it is committing modeling malpractice,” said Karen Clark, President and CEO of Karen Clark & Company. “This Executive Briefing brings more transparency to the science underlying the new earthquake models, and helps companies enhance their risk management decisions by going beyond point estimates derived from models with such obvious and wide uncertainty."
Karen Clark & Company Hires John Tierney as Senior Vice President
BOSTON, MA, August 4, 2009 – Karen Clark & Company, independent experts in catastrophe risk, catastrophe models, and catastrophe risk management, today announced the hire of John Tierney as Senior Vice President. Mr. Tierney will join the firm’s consulting practice to provide clients with an integrated approach to assessing, pricing, and managing catastrophe risks with the aim of improving operational performance and enhancing profitability.
“John has a wealth of experience identifying and implementing efficient, highly customized risk management processes that directly contribute to the bottom line,” said Karen Clark, President and CEO, Karen Clark & Company. “His expertise will complement our efforts to provide insurers with a holistic catastrophe risk management framework that fulfills the requirements of all parts of the organization, from the CEO to the line underwriter, to enable more consistent, reliable risk management decisions.”
Mr. Tierney brings to the firm over 35 years of management, actuarial, and underwriting experience in the property and casualty insurance industry. Much of Mr. Tierney’s career has been spent in consulting, where he has assisted insurers and reinsurers with pricing, underwriting, financial reporting and risk management. Mr. Tierney started his consulting career with Tillinghast-Towers Perrin, where he ultimately became the Managing Principal of the firm’s worldwide property/casualty consulting practice. Mr. Tierney has also served as President of Bunker Hill Insurance Company, a New England-based homeowner insurer, where he revitalized the company through new reinsurance programs, underwriting processes, workflows and technologies. He also worked as Chief Underwriting Officer at Allmerica Property and Casualty Companies where he was responsible for pricing support, product development, reserving, reinsurance and underwriting policy.
Mr. Tierney is a Member of the American Academy of Actuaries and a Fellow of the Casualty Actuarial Society, where he also serves on the Board of Directors. Mr. Tierney received S.B. degrees in management and mathematics from the Massachusetts Institute of Technology.
“Most insurers realize the pitfalls associated with the narrow interpretation of catastrophe model results, but many lack the internal resources to facilitate the translation of model results into integrated operational strategies to improve financial performance,” said Mr. Tierney. “I look forward to working with Karen Clark & Company, a true leader in the field, to provide companies with the guidance to implement robust catastrophe risk management processes and identify the means to improve profitability.”
Karen Clark & Company and TigerRisk Form Strategic Partnership
Integrated cat risk management approach improves profitability
BOSTON, MA, July 20, 2009 – Karen Clark & Company, independent experts in catastrophe risk, catastrophe models, and catastrophe risk management, today announced it has entered into a strategic partnership with TigerRisk Partners, the reinsurance broking and risk/capital management firm founded by industry leaders Jim Stanard and Rod Fox. Together, the companies will provide insurance company clients with an integrated approach to assessing, pricing and managing catastrophe risks to improve profitability.
"Before there were cat models, the industry relied entirely on underwriting. Today, there is an over reliance on models," said Karen Clark. "Neither extreme is optimal. There are ways to assess risk independent of the catastrophe models and to apply that knowledge to more effective use of the catastrophe models. We are excited to be partnering with a highly sophisticated intermediary like TigerRisk to help insurers improve the profitability of their portfolios without model bias."
According to Rod Fox, CEO of TigerRisk, the process starts with helping companies establish a consistent metric for evaluating cat risk. The partnership’s integrated approach includes a rigorous examination of how companies capture and collect data, dissect and validate cat model output, as well as the development and implementation of strategies to improve capital allocations and profitability.
"Today’s difficult marketplace requires a more sophisticated approach for addressing catastrophe risk. Just regurgitating probable losses is not enough. This innovative partnership will enable us to take catastrophe risk management to the next level and improve our clients’ return on capital," said Mr. Fox. "Karen Clark, who literally wrote the book on cat modeling, has a unique ability to discern, quantify and understand model outputs. TigerRisk, in turn, has the skills to integrate these more sophisticated risk profiles to better manage cat risks across diverse portfolios and provide insurers a competitive advantage."
TigerRisk founder Jim Stanard added: "The biggest cat risk management issue facing most companies is establishing management processes, scorecards, and a culture that allows both top management and front line underwriters to effectively use cat models in decision making."
About TigerRisk
TigerRisk was formed in February 2008 by Jim Stanard and Rod Fox. Before founding TigerRisk, Mr. Stanard was CEO of Renaissance Re. He is a Fellow of the Casualty Actuarial Society, holds a PhD in Finance from New York University, and is widely regarded as one of the reinsurance industry’s leading experts in risk underwriting. Rod Fox was previously CEO of specialty insurer Praetorian and CEO of reinsurance brokers Benfield Inc. and E.W. Blanch.
Karen Clark & Company to Co-Sponsor Puerto Rico Catastrophe Risk Management Seminar
Office of the Commissioner of Insurance of Puerto Rico to Co-Sponsor Discussion of
Management of Island’s Hurricane and Earthquake Risk
BOSTON, MA, June 18, 2009 – Karen Clark & Company, independent experts in catastrophe risk, catastrophe models, and catastrophe risk management, today announced the firm will co-sponsor, along with the Office of the Commissioner of Insurance of Puerto Rico, a seminar to address hurricane and earthquake risk management issues confronting the Puerto Rico insurance market. The event, “Fortifying the Puerto Rico Insurance Market Against Catastrophes,” will take place in San Juan on Friday, June 19 from 9:00 a.m. to 1:30 p.m. in the Faculty Room of the University of the Sacred Heart. The event is free and open to the public and the media.
“The Commissioner shares Karen Clark & Company’s commitment to implementing effective risk management processes that conform to best practices,” said Karen Clark, President and CEO, Karen Clark & Company. “We are thrilled to partner in bringing together insurance executives to discuss how companies can better mitigate hurricane and earthquake risk in Puerto Rico by using state-of-the-art technology and data processes.”
The seminar will feature timely commentary on, among other topics, catastrophe risk and the Puerto Rico insurance market; the evolving role of data quality in ratings and reinsurance; and efficient methods for capturing higher quality data on insured properties. Speaking at the event in addition to the Commissioner and Karen Clark are Glen Daraskevich, Senior Vice President, Karen Clark & Company; Jeff Mango, CPA, Assistant Vice President, A.M. Best; and Miguel Barrales, CEO, Flagstone Re.
“Puerto Rico’s exposure to hurricanes and earthquakes, and their potential impact on both citizens and insurers, is a primary concern for this office,” said Insurance Commissioner Ramón Cruz-Colón. “This seminar is an excellent opportunity to draw attention to the risk management issues that directly impact insurance companies and residents of Puerto Rico. We look forward to hosting this event with Karen Clark & Company, and would like to thank them for their participation.”
| Event: | Fortifying the Puerto Rico Insurance Market Against Catastrophes | |
| Date: | June 19, 2009 | |
| Time: | 9:00 A.M. to 1:30 P.M. | |
| Location: | University of the Sacred Heart, Faculty Room, San Juan, PR |
To attend this event, please contact Yvette Domenech Avilés, Office of the Insurance Commissioner of Puerto Rico, (787) 304-1004. Information on the office is available at: http://www.ocs.gobierno.pr/ocspr/.
Karen Clark & Company Selected by the National Association of Insurance Commissioners (NAIC) to Consult on Catastrophe Models
Firm Will Report on Alternatives for National Hurricane and Earthquake Models
SPA Risk LLC to Report on Earthquake Loss Modeling
BOSTON, MA, May 19, 2009 – Karen Clark & Company, independent experts in catastrophe risk, catastrophe models, and catastrophe risk management, today announced it has been selected by the National Association of Insurance Commissioners (NAIC) as the lead consultant in developing a recommendation on the scope, timeline, and potential costs of building a national catastrophe multi-peril model for personal lines.
The NAIC retained Karen Clark & Company to conduct the study and produce the report which will include three sections - hurricane loss modeling, earthquake loss modeling and general modeling. SPA Risk LLC, a consulting firm with special expertise and experience in natural hazards model development, risk assessment, and risk mitigation, has also been retained by the NAIC to develop the earthquake loss modeling section of the report.
"Given the importance of catastrophe models in assessing insurance company exposure to financial loss, the NAIC requires a thorough expert analysis of various alternatives with respect to these models," said Karen Clark, President and CEO, Karen Clark & Company. "We are thrilled to have been selected by this prestigious organization, and to lend our expertise to this ambitious effort."
Karen Clark & Company will determine the feasibility and cost estimates for creating a hurricane model to estimate residential losses nationwide, down to at least the ZIP code level, on an average annual loss basis, and for developing scenario catastrophes and aggregate losses for various return periods. The firm will determine whether a national hurricane model can be leveraged or adapted from existing models, such as the Florida Public Hurricane Loss Model and the HAZUS model. SPA Risk LLC will conduct a similar assessment for an earthquake model. Karen Clark & Company will also provide general expertise to regulators on the feasibility and costs of building a national catastrophe model, and guidance on proper evaluation of private catastrophe models.
"The increased use of catastrophe models creates a new challenge for insurance regulators, since the models play a significant role in a company's rate-setting, underwriting, claims administration and overall financial solvency," said Charles Scawthorn, Principal, SPA Risk LLC. "We look forward to working with Karen Clark & Company to help foster a better understanding of these challenges and the feasibility of building a national catastrophe model."
The feasibility study is scheduled to be completed in mid-June. Karen Clark & Company will work with the NAIC to develop realistic timetables and cost projections based on the alternative approaches.
About Karen Clark & Company
Karen Clark & Company provides software products and consulting services that help insurance companies evaluate and improve their exposure data processes, to better understand catastrophe risk, and to more effectively utilize models and model results. Karen Clark & Company professionals are independent experts in catastrophe risk, catastrophe models, and catastrophe risk management who work with insurance company executives to enhance business strategies, competitive advantage, and financial results. For more information, please visit www.karenclarkandco.com.
About SPA Risk LLC
SPA Risk LLC is a consulting firm with special expertise and experience in natural hazards model development, risk assessment, and risk mitigation for agencies and companies with exposure to catastrophes such as earthquakes, hurricanes, fire, blast and other hazards. SPA is recognized by government, regulators, insurers and the financial industry for expertise and leadership in the field of risk assessment. Clients include the World Bank, Bank of America, the State of California, Federal Emergency Management Agency, US Geological Survey and various other insurance and corporate entities. SPA is an innovator - an example is OpenRisk: object-oriented, web- and GUI-enabled, open-source, and freely available software code for conducting multihazard risk analysis. The resulting body of code and applications are also referred to as OpenRisk. For more information see www.sparisk.com.
Karen Clark & Company President and CEO to Deliver Stanford University’s Shah Family Distinguished Lecture
Lecture to Address “Building and Using Complex Models to Make Financial Decisions"
BOSTON, MA, May 4, 2009 – Karen Clark & Company, independent experts in catastrophe risk, catastrophe models, and catastrophe risk management, today announced that President and CEO Karen Clark has been selected to deliver Stanford University’s Shah Family Distinguished Lecture on Thursday, May 14, 2009. The event, sponsored by the Department of Civil and Environmental Engineering at Stanford, will take place at 4:45 p.m. in Room 105 at Building 320 (Geology Corner), Stanford University, Stanford, CA.
In her lecture, Building and Using Complex Models to Make Financial Decisions, Ms. Clark will address the state of the financial services industry in the context of models used to assess and manage catastrophe risk. Common modeling malpractices will be discussed along with best practices and future research in this area.
“Complex decision-making models have become ubiquitous in many industries, particularly financial services,” said Ms. Clark. “While a model can provide a consistent decision-making framework and expert quantification of key system variables, model precision can be confused with accuracy. I am honored to participate in the Shah Family Fund Lecture Series, and discuss how catastrophe risk management issues relate to the current economic situation.”
The Shah Family Fund was established in 1995 to provide annual fellowships for students in civil engineering, an annual prize for an outstanding staff member in the School of Engineering, and an annual distinguished lecture on catastrophic risk management and related areas. Haresh Shah is professor emeritus and former chair of the Department of Civil and Environmental Engineering at Stanford. He is the founding member of the board of directors of Risk Management Solutions Inc., and a leading expert on probability and reliability theory.
For more information on the 2009 Shah Family Distinguished Lecture, please visit http://blume.stanford.edu/Blume/2009ShahFamilyLecture.html.
About Karen Clark & Company
Karen Clark & Company provides software products and consulting services that help insurance companies evaluate and improve their exposure data processes, to better understand catastrophe risk, and to more effectively utilize models and model results. Karen Clark & Company professionals are independent experts in catastrophe risk, catastrophe models, and catastrophe risk management who work with insurance company executives to enhance business strategies, competitive advantage, and financial results. For more information, please visit www.karenclarkandco.com.
Karen Clark & Company Launches RiskRover™ Mobile Inspection Technology
Application Streamlines Inspection Process, Enhances Data Quality and Analysis
BOSTON, February 10, 2009 – Karen Clark & Company, independent experts in catastrophe risk, catastrophe models, and using model results to manage risk, today announced the launch of RiskRover™, a new software product that helps insurance companies collect and analyze data from property inspections. The application helps insurers obtain better information about the properties they insure, while increasing the efficiency of inspectors and underwriters
The RiskRover software is designed for field inspectors and loss control specialists and intended to be installed on a "smartphone" or similar handheld device for use in the field. With RiskRover, an inspector can capture detailed property attributes using customizable data fields, photos and videos with tags, and handwritten notes and sketches. The application can also record the address and coordinates of the property using the device’s GPS system.
The information collected during the inspection is instantly transmitted to an online database for immediate accessibility. The included RiskInsight™ interface allows underwriters and other staff to easily query and view the data and photos captured by RiskRover.
"Access to detailed information about insured properties is the basis for estimating loss potential," said Glen Daraskevich, Senior Vice President, Karen Clark & Company. "RiskRover dramatically improves the quality and ease of access to data for underwriting and risk analysis, allowing companies to make quicker and more informed decisions about their risk."
RiskRover gives companies a competitive advantage by dramatically decreasing the time it takes underwriters to receive the information they need to make underwriting decisions and to give binding quotes back to agents and brokers. By capturing inspection data electronically, RiskRover relieves inspectors of the additional step of transcribing observations into a report. The application also maintains a record of data input and notifies inspectors of any missing data while they are still onsite. The RiskInsight interface facilitates easy data extraction into catastrophe models, pricing systems, and other risk analyses.
"Because RiskRover improves the quality of company data while reducing costs, companies see huge productivity gains within weeks of implementing this new technology," said Karen Clark, President and CEO of Karen Clark & Company. "We are pleased to be working with insurers to implement technology that not only brings efficiency gains but also enhances risk selection, pricing and catastrophe risk management."
More information on RiskRover can be accessed on the company’s website, www.karenclarkandco.com.
About Karen Clark & Company
Karen Clark & Company provides software products and consulting services that help insurance companies evaluate and improve their exposure data processes, to better understand catastrophe risk, and to more effectively utilize models and model results. Karen Clark & Company professionals are independent experts in catastrophe risk, catastrophe models, and catastrophe risk management who work with insurance company executives to enhance business strategies, competitive advantage, and financial results. For more information, please visit www.karenclarkandco.com.
Karen Clark & Company Report Analyzes Performance Of Near Term Hurricane Models
Short Time Horizon Appears Inadequate for Predicting Insured Losses
BOSTON, December 16, 2008 – Karen Clark & Company, independent experts in catastrophe risk, catastrophe models, and catastrophe risk management, today released a report on the performance of near term hurricane models. The report finds the models, designed to predict insured losses in the U.S. from Atlantic hurricanes for the five-year period ending in 2010, significantly overestimated these losses for the cumulative 2006 through 2008 hurricane seasons. The report, Near Term Hurricane Models – How Have They Performed?, is available at www.karenclarkandco.com.
Near term models were introduced in 2006 by the three major catastrophe modelers − AIR Worldwide (AIR), EQECAT and Risk Management Solutions (RMS). AIR initially predicted an overall annualized increase in hurricane losses of 40 percent above the long term average, but later lowered that figure to 16 percent in 2007. EQECAT predicted increases of between 35 and 37 percent, and RMS consistently predicted an overall increase of 40 percent above the long term average.
Assuming long term average annual hurricane losses of $10 billion for each year, these figures translate into cumulative insured losses for 2006 through 2008 of $37.2 billion, $40.8 billion, and $42 billion respectively, for the AIR, EQECAT and RMS models. The actual cumulative losses were $13.3 billion, far lower than the model predictions, and more than 50% below the long term cumulative average of $30 billion.
"With the close of the 2008 hurricane season, and three years into the application of near term hurricane models, it is a good time to evaluate the models’ performance," said Karen Clark, President and CEO of Karen Clark & Company. "While it is still too early to make definitive conclusions about the near term models, with insured losses significantly below average for the cumulative 2006 through 2008 seasons, initial indications are there is too much uncertainty around year-to-year hurricane activity and insured losses to make credible short term predictions."
Catastrophe models were introduced to the insurance industry in the late 1980s. By utilizing many decades of historical data, the models gave insurance companies better estimates of what could happen and more specifically, the probabilities of losses of different sizes on specific portfolios of insured properties. The destructive 2004 and 2005 hurricane seasons were catalysts for introducing the near term models. Use of these models by insurance and reinsurance companies, which are based on short term assessments of the frequencies of hurricanes, was a radical departure from the way in which catastrophe average annual losses (AALs) and probable maximum losses (PMLs) are typically derived.
According to the Karen Clark & Company report, in order for insured losses to reach 40 percent above average for the five year period, in line with the highest model predictions, the next two years will have to be similar to 2004, or there will have to be another Hurricane Katrina.
The report notes that hurricane activity is influenced by many climatological factors, many of which are known, but some unknown, by scientists. There are complicated feedback mechanisms in the atmosphere that cannot be quantified precisely even by the most sophisticated and powerful climate models. The report recommends that insurers, reinsurers and regulators evaluate the efficacy of the near term hurricane models in light of this uncertainty.
"Standard, long term catastrophe models are characterized by a high degree of uncertainty, and short term assumptions on frequency and severity only magnify this uncertainty and the volatility in the loss estimates," noted Ms. Clark. "While computer models are valuable decision-making tools, they can lead to bad business decisions when not used correctly. Model users frequently forget that all models are based on simplifying assumptions, and therefore all models are wrong. Models attempt to replicate reality, but they are not reality."
About Karen Clark & Company
Karen Clark & Company is an independent provider of catastrophe risk management products and services. The company works with senior executives and boards of directors to help ensure their companies have in place effective risk management processes that conform to best practices. Karen Clark & Company also provides unique executive briefings to inform senior management and company boards on specific information they need to know on catastrophe risk, catastrophe models, and using model results to manage risk. The company was formed by Karen Clark, internationally recognized expert in catastrophe risk assessment and management. Ms. Clark developed the first hurricane catastrophe model, and in 1987 founded the first catastrophe modeling company, Applied Insurance Research (AIR). For more information, please visit www.karenclarkandco.com
Karen Clark & Company President and CEO Honored as Innovator in Risk Management
BOSTON, October 6, 2008 – Karen Clark & Company, independent experts in catastrophe risk, catastrophe models, and catastrophe risk management, today announced that Karen Clark, President and CEO, has received the Risk Innovator™ Award in the Insurance category from Risk & Insurance®. The Risk & Insurance® Risk Innovator™ Award recognizes winners in 13 industries who have, in the past year, demonstrated innovation and excellence in risk management.
According to the article in Risk & Insurance® announcing the award, Ms. Clark has proven herself over the last quarter century "to be among the insurance industry’s greatest Risk Innovators." The article goes on to say that Ms. Clark "is as known for her integrity as she is for her innovations. She launched her own company to address the two major challenges she discovered after Hurricane Katrina."
"I am honored to be recognized among the top leaders in risk management," said Ms. Clark. "Innovation has been a driving force in the insurance sector, particularly over the past several years. With so many new tools and technologies, it is vital that insurance companies apply them in a way that conforms to best practices. In founding Karen Clark & Company, my goal is to help insurance executives understand and utilize catastrophe risk management technology to their fullest advantage."
The award is a tribute to Ms. Clark’s pioneering role in the field of catastrophe risk management. In 1987, she created the first hurricane catastrophe model and founded the first catastrophe modeling company, Applied Insurance Research (AIR), now AIR Worldwide. At AIR, Ms. Clark developed the probabilistic catastrophe modeling techniques that revolutionized the way insurers, reinsurers and financial institutions manage their catastrophe risk. When Hurricane Katrina struck in 2005, the aftermath exposed a number of challenges in the insurance sector, namely a lack of high-quality data on insured properties and an overreliance on catastrophe model output. Ms. Clark launched Karen Clark & Company in 2007 to help companies collect better data and to better use catastrophe models as sophisticated tools for making important risk management decisions.
The Risk Innovator™ Award is one of many recognitions Ms. Clark has received. Earlier this month, she was named the most influential woman in reinsurance by Global Reinsurance, and in May 2008, she received an award certificate for the 2007 Nobel Peace Prize bestowed on the Intergovernmental Panel on Climate Change (IPCC). Last year, The Review Worldwide Reinsurance Awards presented Ms. Clark with the Lifetime Achievement Award for her outstanding long-term contribution to the re/insurance industry. Ms. Clark has also been selected by Business Insurance as a "Woman to Watch," and in 2001 she was named "Woman of the Year" by the Association of Professional Insurance Women (APIW).
About Risk Innovator
The Risk & Insurance® Risk Innovator™ Award recognizes winners in 13 different industries who have, in the past year, demonstrated innovation and excellence in risk management. These key individuals see risk differently and have resolved risk-related problems in a unique or innovative way. They view risk not only as a threat, but also as an opportunity for their organizations.
About Karen Clark & Company
Karen Clark & Company is an independent provider of catastrophe risk management products and services. The company works with senior executives and boards of directors to help ensure their companies have in place effective risk management processes that conform to best practices. Karen Clark & Company also provides unique executive briefings to inform senior management and company boards on specific information they need to know on catastrophe risk, catastrophe models, and using model results to manage risk. The company was formed by Karen Clark, internationally recognized expert in catastrophe risk assessment and management. Ms. Clark developed the first hurricane catastrophe model, and in 1987 founded the first catastrophe modeling company, Applied Insurance Research (AIR). For more information, please visit www.karenclarkandco.com
Karen Clark & Company Introduces KC Wind Damage Scale™
Allows Insurers and Other Stakeholders to Quickly Assess Likely Impact of Tropical Cyclones
BOSTON, August 19, 2008 – Karen Clark & Company, an independent provider of catastrophe risk management services, today announced the introduction of the KC Wind Damage Scale™, a new tool for quickly assessing the likely insured damage from tropical cyclones.
The scale is designed to give insurance companies and others a measure of the probable wind damage to buildings, contents and business interruption caused by a tropical storm or hurricane. The scale ranges from KC 0, for a storm with winds less than 40 miles per hour and in which negligible insured damage would be expected, to KC 7, denoting a hurricane with winds in excess of 160 miles per hour, and in which all but engineered and highly fortified structures would likely suffer complete destruction. The scale provides a detailed Damage Description for each category.
For each landfalling U.S. hurricane, Karen Clark & Company will also provide the wind damage contours after landfall. The damage contours will give insurance companies a good idea of the nature of the claims in specific geographical areas affected by the storm.
The KC Wind Damage Scale differs markedly from the well-known Saffir-Simpson Hurricane Scale, which is used to categorize hurricanes. The SS scale starts at 74 mph, while insured damages are typically experienced at lower wind speeds.
"While Saffir-Simpson is the standard hurricane scale used for many purposes including warnings and evacuations, the KC Wind Damage Scale is tailored specifically to the needs of insurance company executives who need a quick assessment of the likely insured damage resulting from a storm,” said Karen Clark, President and CEO of Karen Clark & Company. “The KC Wind Damage Scale provides a detailed description of the likely claims resulting from a hurricane which helps in planning the loss adjusting and reserving processes."
The KC Wind Damage Scale is provided on an interactive map, allowing users to see the tracks, and KC Wind Damage Scale designations, for significant hurricanes impacting the U.S. since 1900. A drop-down menu lets users select which storms to plot. The user can also choose maps showing a Standard, Satellite, Hybrid or Vegetation view. The KC Wind Damage Scale and maps can be accessed from the company’s website, www.karenclarkandco.com.
About Karen Clark & Company
Karen Clark & Company is an independent provider of catastrophe risk management products and services. The company works with senior executives and boards of directors to help ensure their companies have in place effective risk management processes that conform to best practices. Karen Clark & Company also provides unique executive briefings to inform senior management and company boards on specific information they need to know on catastrophe risk, catastrophe models, and using model results to manage risk. The company was formed by Karen Clark, internationally recognized expert in catastrophe risk assessment and management. Ms. Clark developed the first hurricane catastrophe model, and in 1987 founded the first catastrophe modeling company, Applied Insurance Research (AIR). For more information, please visit www.karenclarkandco.com
Karen Clark & Company Issues First IMARC® Data Score
June 2, 2008—Karen Clark & Company announced today that it issued the first IMARC® Data Score to HomeWise Insurance Companies. HomeWise earned an IMARC® Data Score of 675 (Excellent).
HomeWise was the first company to receive an IMARC® Data Score as a result of the rigorous IMARC® Data Review process. The review process involved a detailed evaluation of internal data processes carried out through a series of onsite meetings with HomeWise, their policy quoting system and policy management system vendors, their agents and field inspectors. The HomeWise exposure data used for catastrophe modeling was thoroughly analyzed and tested for resolution, completeness and accuracy using independent data sources, methodologies and actual engineering surveys of the insured properties.
The IMARC® Data Score was included in the disclosure of the Mangrove Re Ltd. Principal At-Risk Variable Rate Note Program. Mangrove Re Ltd. issued notes on May 30, 2008, providing $210 million of coverage against hurricane losses in Florida.
"I believe the IMARC® Data Score is important to the future of a healthy Insurance-Linked Securities market and will become a major consideration when it comes to evaluating future ILS deals," said Dr. John Seo of Fermat Capital Management, LLC. "Of course, no single factor in isolation should be the sole basis of an investment decision, but I expect that as time goes by an IMARC® Data Score will come to be expected by investors for any significant indemnity-based ILS deal. If the IMARC® Data Score is not given, we would want to know why."
"The IMARC® Data Review is independent of any particular catastrophe model," said Karen Clark, President and CEO of Karen Clark & Company. "The review process is applicable to the exposure data elements used to assess the catastrophe loss potential for all regions, perils and vendor models. It is a standard process that results in an exposure data score providing external stakeholders with a consistent and comparable measure of exposure data quality across companies," continued Ms. Clark.
"At HomeWise, it's a top priority to obtain high quality data on the properties we insure," said Dale Hammond, President of HomeWise. "This enables us to have more confidence in our catastrophe model results and our risk management decisions. To that end, we have invested significantly in high quality systems, processes and data, and we wanted to have a team of independent experts evaluate our processes and data relative to best practices and standard benchmarks," continued Mr. Hammond.
"Reinsurers and catastrophe bond investors have been urging us to develop a standard exposure data review and scoring process that would be consistent across companies," said Ms. Clark. "For HomeWise, twenty-five specific data attributes were scored for resolution, completeness and accuracy, and nearly half of the data attributes and all of the highest weighted attributes scored at least 90 percent on completeness and accuracy. The IMARC® scoring algorithm resulted in a score of 675 out of a possible 800 which according to the IMARC® scale is Excellent."
"We value the IMARC® Data Score because we factor data quality into our pricing and underwriting decisions," said Ian Branagan, Senior Vice President of Renaissance Re. "While we perform our own internal data checks, we value additional reviews as extensive and thorough as IMARC®. We are pleased that the industry has a new standard that can contribute to ongoing efforts to further enhance the quality of data utilized by the industry and to further a more consistent, robust understanding of catastrophe risk," continued Mr. Branagan.
Karen Clark Honored with Award for Nobel Peace Prize
BOSTON, May 21, 2008—Karen Clark & Company announced today that Karen Clark, President and CEO, has been honored with an award certificate for the 2007 Nobel Peace Prize bestowed on the Intergovernmental Panel on Climate Change (IPCC). According to the accompanying letter from R. K. Pachauri, IPCC Chairman, "We are providing a copy of this award only to those who have contributed substantially to the work of the IPCC over the years since the inception of the organization."
Karen Clark first contributed to the work of the IPCC as a co-lead author for the Second Assessment Report published in 1995. Since that time, she has sponsored and supported scientific research on climate change and its potential impacts with respect to severe weather events. "It's a great honor to be associated with the IPCC, the 2007 co-recipient of the Nobel Peace Prize, and to be recognized as a valuable contributor to such an important body of scientific work," said Ms. Clark. "Climate change is clearly one of the most critical issues of our time and an area of vital ongoing scientific investigation," continued Ms. Clark.
On December 10, 2007 the Intergovernmental Panel on Climate Change and Albert Arnold (Al) Gore Jr. were awarded the Nobel Peace Prize "for their efforts to build up and disseminate greater knowledge about man-made climate change, and to lay the foundations for the measures that are needed to counteract such change." In his acceptance speech, Mr. Pachauri stated "The IPCC produces key scientific material that is of the highest relevance to policymaking, and is agreed word-by-word by all governments, from the most skeptical to the most confident. This difficult process is made possible by the tremendous strength of the underlying scientific and technical material included in the IPCC reports."
New Executive Briefing on Northeast Hurricane Risk
Boston, February 25, 2008—Karen Clark & Company announced today a new Executive Briefing on Northeast Hurricane Risk. This briefing provides insurance company senior executives and boards of directors with important information in five key areas: the likelihood of future major events, the nature of the hurricane damage, why the catastrophe models differ so significantly in this region, how the model results can be benchmarked for credibility, and current competitive threats and opportunities in the Northeast.
"Insurance companies have been relying too heavily, and in some cases exclusively, on the catastrophe model output to make important financial decisions", said Karen Clark, President and CEO of Karen Clark & Company. "This is despite the fact that Hurricane Katrina and other recent events clearly highlighted the inaccuracies and uncertainties inherent in the catastrophe models. In the Northeast region, the results of different hurricane models can differ by more than a factor of two giving the clear signal that companies need to look beyond the models to understand and manage their hurricane risk", continued Ms. Clark.
This Executive Briefing provides clear and succinct information on what is known about hurricanes in the Northeast. It explains how that information gets incorporated into the catastrophe models and why the model results can differ so widely. The briefing also shows how other independent information can be used to benchmark the model results and provide more transparency with respect to a company's likely losses from future hurricane events.
"Company executives have been asking me for more insight into the hurricane risk in this region because of the dramatic model changes and market swings in recent years", said Ms. Clark. "This Executive Briefing packages the most important information into a concise format appropriate for senior executives and boards of directors."
Since hurricane Katrina, some of the catastrophe model changes have resulted in loss estimates increasing by up to 100 percent or more in Northeastern coastal areas. As a result, reinsurance costs have risen dramatically for all coastal areas, including Connecticut, Rhode Island and Southeastern Massachusetts—areas that have not been affected by a major hurricane in over 50 years. This has led some insurers to increase premiums dramatically for policyholders in these areas and many insurers to stop writing business in coastal areas.
Insurance company executives, policyholders and regulators all want answers to the root causes behind how and why this market disruption occurred. This Executive Briefing addresses the specific issues insurance company executives and boards need to know in order to adapt their strategies effectively to the current market situation.
Karen Clark is a globally recognized authority on hurricane risk, hurricane models, and using scientific information to assess and manage catastrophe loss potential. Over the past few years, she has given dozens of presentations to industry organizations, investor groups and boards of directors. Ms. Clark was recently featured in a History Channel special on Northeast Hurricanes.
The Executive Briefing on Northeast Hurricane Risk can be scheduled at convenient times and locations. To request information please e-mail .
Glen Daraskevich Joins Karen Clark & Company As Senior Vice President
Boston, December 3, 2007—Karen Clark & Company announced today Glen Daraskevich has joined as Senior Vice President to head up the consulting group responsible for the IMARC® comprehensive review process. The recently launched IMARC reviews help companies ensure they have in place holistic risk management processes that comply with best practices. Holistic risk management practices incorporate independent benchmarks and metrics to assess the quality of catastrophe model input and output.
"Mr. Daraskevich is the ideal candidate to lead this new industry initiative that is transforming and significantly improving how companies assess and manage catastrophe risk," said Karen Clark, CEO of Karen Clark & Company. "This important role requires a unique individual with specific skills, professional experience and educational background, and Glen fits the bill perfectly."
Mr. Daraskevich spent the last six years at AIR Worldwide where he rose from Senior Consultant in the Consulting Services group to Vice President of the Research and Modeling team encompassing over 40 scientists and engineers, including 28 Ph.D.s. Along with managing the development efforts for all catastrophe models, he was actively involved in the development of the U.S. Wildfire model. Mr. Daraskevich led several post disaster damage surveys for the hurricanes of 2004 and 2005, including Katrina. Prior to joining AIR, Mr. Daraskevich held various positions designing, reviewing and auditing information systems and processes. He earned a B.S. degree in Civil Engineering and Master's degrees in Engineering and Information Systems.
"I am very excited about my new role at Karen Clark & Company", said Mr. Daraskevich. "It isn't often one has the opportunity to start a new entity with an industry leader and visionary, and while the mission is challenging to be sure, I'm looking forward to working with the companies who are ready to advance to the next level of effective catastrophe risk management."
Karen Clark & Company Launches Independent Reviews of Catastrophe Risk Management Processes
BOSTON, November 5, 2007—Karen Clark & Company announced today it is providing comprehensive reviews of company internal catastrophe risk assessment and management processes. The independent reviews are designed to help companies ensure they have in place holistic risk management processes that comply with best practices. Holistic risk management practices incorporate independent benchmarks and metrics to assess the quality of catastrophe model input and output.
Karen Clark & Company independent reviews cover the five most important components of an effective risk management process—preparing the exposure data, benchmarking the exposure data, performing the model analyses, benchmarking the model-generated loss estimates, and applying the model results. The comprehensive independent review, called IMARC®, Independent Metrics for the Assessment of Risk from Catastrophes, provides company management with an assessment of each component of their internal process along with recommendations for improvements.
"In meetings with dozens of companies over the past several months, I found incredible demand for a recognized, independent review process. Even companies that have already developed extensive internal processes want a team of independent experts to review those processes," said Karen Clark, CEO of Karen Clark & Company. "The IMARC reviews also provide a way for external stakeholders such as rating agencies and investors to better differentiate companies based on the relative quality of their risk management processes and their exposure data."
Karen Clark Presented with Lifetime Achievement Award
BOSTON, September 6, 2007—AIR Worldwide and Karen Clark & Company today announced that Karen Clark, vice chair of AIR Worldwide, has been awarded The Review Worldwide Reinsurance Awards' Lifetime Achievement award. The prestigious award recognizes an individual who has made the most outstanding long-term contribution to the re/insurance industry.
The Worldwide Reinsurance Awards judging panel, which is made up of CEOs and senior executives from within the industry, selected Ms. Clark after reviewing nominations from around the world. The award was presented to Karen Clark at a ceremony on Wednesday, 5th September held at The Dorchester Park Lane Hotel in London. The judges referred to Ms. Clark as, "the founder of modern day modeling" who "put modeling on the map."
As the founder of AIR Worldwide, Karen Clark is an internationally recognized expert in the field of catastrophe risk modeling. In 1987, Ms. Clark pioneered the probabilistic catastrophe modeling techniques that revolutionized the way insurers, reinsurers and financial institutions manage their catastrophe risk. In addition, she has led the development of innovative technologies that enable companies to identify, quantify and plan for the financial consequences of catastrophic events. In 2000, she was selected by Business Insurance as one of the "Top 100 Women in the Insurance Industry." In 2001, Ms. Clark was honored as "Woman of the Year" by the Association of Professional Insurance Women (APIW) and in 2006, she was selected by Business Insurance as a "Woman to Watch."
"Receiving the Lifetime Achievement Award is a great honor for me," Ms. Clark said. "And while it was extremely challenging to create and develop the catastrophe modeling discipline, this award also speaks to the industry's ability to embrace new, highly sophisticated technology for complex insurance decisions. I'm now looking forward to working with companies to take the industry to the next level with respect to catastrophe risk management."
In August 2007, Ms. Clark launched a new independent firm—Karen Clark & Company—to help companies better use catastrophe models as sophisticated tools for making important risk management decisions.
"Karen Clark created an industry when she founded AIR, with a vision to change the way companies assess and manage their catastrophe risk," said S. Ming Lee, president and CEO of AIR Worldwide. "This award is a well deserved recognition of her remarkable achievements over the past twenty years, and the impact she has had on the industry."
Catastrophe Modeling Expert Karen Clark Launches Independent Firm to Help Companies Better Utilize Risk Assessment Tools
Boston, August 13, 2007—Karen Clark today announced the formation of a new independent firm—Karen Clark & Company—to help companies better use catastrophe models as sophisticated tools for making important risk management decisions. In her new company, Ms. Clark will be working closely with senior executives and boards of directors to make sure their companies have in place effective risk management processes that conform to best practices. Karen Clark & Company will offer consulting services, independent reviews of company internal processes, and executive briefings to provide senior management and their boards with specific information they need to know about catastrophe risk, catastrophe models, and using model results to manage the risk.
"While the catastrophe models and applications will continue to evolve and improve over time, the bigger challenges now are in helping companies get full value from these tools" said Ms. Clark, president and CEO of Karen Clark & Company. "Senior executives and directors of companies exposed to catastrophes realize they need independent information about catastrophe risk and best practices for managing that risk because every year the financial exposure to catastrophe loss increases. Companies have asked me for more insight so I am very excited to be taking on these new challenges and working with industry leaders to develop more effective and holistic risk management processes."
In 1987, Ms. Clark founded the catastrophe modeling industry after identifying a need for probabilistic modeling techniques and better catastrophe risk assessment tools for the insurance industry. This important discovery led to the development of several innovative technologies that are now industry standard systems for insurance pricing, underwriting, and risk transfer decision-making. That same year she founded AIR, the premier catastrophe modeling firm which today serves more than 400 client companies worldwide.
"It's become clear the industry needs an independent company with the expertise to inform CEOs and their boards on what they need to know about catastrophe risk and catastrophe models and to help them ensure the integrity of their internal risk assessment and management processes," continued Clark. "As rating agencies, regulators and other stakeholders take an increasingly active interest in how companies are assessing and managing risk, independent information and reviews of those processes are becoming much more important."