Natural Disaster Data: Enhance Risk Management in Insurance

Increasing natural disasters and severe weather events have shaken the insurance markets in recent years. In 2023 alone, global natural disasters caused a massive $280 billion in damages, with only $108 billion covered by insurers worldwide, highlighting a significant protection gap. (SwissRe)

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2023 was the hottest year on record, and experts predict 2024 will be even hotter. As temperatures rise, they will continue to disrupt weather patterns, leading to more earthquakes, floods, heatwaves, wildfires, etc., threatening life, ecosystems, and economies.

With the increasing frequency of severe weather events and natural disasters, the predictive ability to assess climate risks becomes more important than ever for building financial resilience.

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This is where natural disaster data steps in—to give a better understanding of current and future climate risks.

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How can insurance use natural disaster data?

Climate extremes are trending in the wrong direction, and insurers need to think beyond the one-size-fits-all approach. Understanding the past is crucial for shaping the future, and this especially holds for the insurance industry. 

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Historical natural disaster data enables insurers to understand and quantify the impacts of catastrophes on critical business functions.

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For instance, the innovative use of historical data after Hurricane Katrina helped insurers reassess their pricing strategies and estimate the potential risks of future hurricanes. Similarly, the National Flood Insurance Program, managed by FEMA, uses historical flood data and flood maps to provide insurance to help reduce the socio-economic impacts of floods. 

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Using environmental insights empowers businesses to move from reactive measures and become proactive when it comes to managing catastrophic risks. The insurance sector can use natural disaster data to:

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1. Provide more accurate pricing.

Fair policy pricing is most important to an insurance company. Insurance underwriters must evaluate the risks associated with insuring properties in various locations. Traditional models might not account for the increasing frequency and severity of natural disasters driven by climate change, leading to underpriced policies and unexpected losses.

With access to detailed historical data on natural disasters, insurers can adjust policy premiums accurately and set appropriate coverage limits based on actual risk levels.

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Benefits

• Improved Pricing Accuracy
• Reduced Loss Ratios

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2. Develop new products and customize coverage plans.

A coastal town on top of a seismic zone will have a different risk profile than an inland city in the same situation. This highlights the importance of insurers developing customized policies.

Using historical natural disaster data, insurers can create a more precise picture of risk and develop new products that meet customers' needs in disaster-prone areas. This helps ensure people in vulnerable geographic areas are better protected.

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Benefits

• Enhanced customer satisfaction and retention
• Ace market competitiveness
• Improved operational Efficiency

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3. Improve Catastrophe modeling

Since the 1980s, catastrophe models have continuously evolved to improve risk management. Integrating sophisticated models with natural disaster data, including the severity, frequency, and impacts of earthquakes, floods, droughts, etc., gives a granular understanding of the risk profiles of different geographic areas. A deeper insight translates into several benefits:

• Informed decision-making                                     
• Effective resource allocation
• Enhanced risk mitigation strategies

For detailed insights, read 👇

From Risk to Reward: How Natural Disaster Forecasting Tools Can Help Businesses and Insurance Coverage

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Challenges

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According to Aon, the insurance sector can see more than $20 billion in premium growth by 2030 related to environmental megatrends. However, the insurance industry is facing many challenges in the context of natural disaster risk assessments, such as a lack of high-resolution natural disaster data to assess physical risks and difficulty combining geo-related data from different sources in a single application, leading to inefficient underwriting processes.

Simultaneously, the insurance sector has a huge opportunity to close the protection gap.

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Ambee can help insurers with accurate natural disaster data

Data is the cornerstone for climate risk assessments and analysis, and Ambee provides enterprise-ready natural disaster data. It also includes event-specific details of a disaster, like wind speeds, rainfall, seismic activity, and fire intensity. Additionally, you get validated metrics like magnitude for earthquakes based on historical earthquake data.

Besides, there are several reasons you should choose Ambee’s data:

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1. Comprehensiveness

Ambee’s Natural Disaster API provides historical and near real-time information on disasters such as earthquakes, floods, droughts, volcanoes, cyclones, and forest fires.

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2. Transparency in sources

The API collects and analyzes data from 10+ credible sources to give event-specific detailed information.

Our sources include:

3. Unparalleled accuracy worldwide

Ambee leverages advanced algorithms and multiple credible data sources to ensure maximum accuracy. The data is available for more than 150 countries worldwide. 

You can assess the impact of the disaster at any location by using coordinates or by outlining a polygon.

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4. Easy integration and customization

You can easily integrate Ambee’s API into any application, platform, or system and customize it based on your location or disaster type.

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5. Developer friendly

Easy-to-use documentation, code samples, and SDKs in popular programming languages ensure smooth integration and reduce development time. Check out our detailed documentation here for the complete picture.

Here’s a full list of response parameters in the Natural Disaster API:

But how do you sign up for access to Ambee’s natural disaster API?

You can sign up by clicking on the following link: Ambee API Dashboard

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The Climate Way Ahead 

Climate extremes are unprecedented but predictable (gray swan events). As we’ve seen, the power of historical natural disaster data in assessing climate risks with greater precision and developing targeted coverage plans is undeniable. Equally important is real-time information on disasters for informed decision-making during emergencies, improving risk management.

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Climate change is a complex problem; no industry can solve it alone. It requires collaborations between insurance companies, data providers, and policymakers to quantify and mitigate climate risks.

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Looking ahead, advancements in AI and ML technologies will shape the future of insurance. Dynamic pricing models and hyper-personalized policies tailored to individual needs based on real-time data will become a reality. Additionally, parametric insurance can be a strategic tool where insurers partner with a third party to measure trigger events.

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As the climate continues to change, integrating comprehensive and credible climate data will be crucial to building financial resilience. Ambee Natural Disasters API offers comprehensive data on a wide range of natural disasters.

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Get in touch to learn more about how climate data can help insurance companies.