Nasdaq and Global Earthquake Model Foundation (GEM) recently announced a partnership where GEM’s earthquake models will be made available through Nasdaq Risk Modelling for Catastrophes. We sat down with John Schneider, Secretary General, to learn more about GEM, their mission and the partnership with Nasdaq.
1. Can you start by telling us about GEM – why was the organization formed and when?
Following a recommendation of the OECD Global Science Forum in 2006, GEM Foundation was incorporated in Pavia, Italy as a non-profit organization in 2009. GEM was created with the financial support of about 20 public and private sector organizations globally with a vision of a world that is resilient to earthquakes.
At GEM’s core are its governing principles of openness, collaboration, public good and credibility, which underpin GEM’s approach to developing models, tools and data for wide dissemination across public, private and academic sectors. Through a wide range of partnerships worldwide, our aim is to improve risk assessment capability and, in turn, the risk awareness needed to inform and motivate risk reduction activities – all to better assess the risk of earthquakes.
2. Can you talk about GEM’s mission and vision for the future?
GEM is now recognized as a leading source of earthquake hazard and risk information, tools and expertise for risk assessment globally. Since our inception, we have provided training to hundreds of scientists and engineers in the use of the OpenQuake software, and we collaborate with many organizations on the development of exposure and vulnerability data and on multi-hazard risk assessments.
Given the global demand for catastrophe risk information, our mission also includes other natural hazards and cascading risks in the pursuit of integrated risk assessments and solutions that inform resilience planning and sustainable development. While GEM’s core capability will remain in improving earthquake risk assessment, GEM’s global collaboration network, it’s experience in public-private partnerships, its developments of global exposure and vulnerability data, and its standards for risk modelling and data sharing are being leveraged to support multi-hazard risk modelling.
Some specific areas where GEM is currently advancing the state of practice is in assisting governments with probabilistic hazard modelling for revision of seismic design regulations (a.k.a. building codes), in urban risk assessment for disaster risk reduction, and in developing risk indicators to support the Sendai Framework. We have also initiated work on the next generation of earthquake hazard/risk models that more fully capture time-dependence, uncertainty and cascading risks. Areas of active research are moving well beyond understanding the immediate physical and direct economic impact to modelling disaster recovery and resilience, and forecasting future risk by incorporating the dynamic nature of vulnerability and exposure. These are also areas where we see the potential for more collaboration with, for instance, the climate change community.
3. What type of organizations can make use of GEM’s models, and how are they helped by using them?
GEM supports the development of risk models in an open and transparent manner and in collaboration with local organizations where possible. This has resulted in a range of hazard and risk assessments for South America, the Caribbean and Central America, Sub-Saharan Africa, the Middle East and Asia.
Our software and hazard/risk products support for example earthquake alerts, community awareness and warning systems, national building codes as well as safety of critical facilities in the energy, water and transportation sectors. Our hazard and risk models are used not only in projects funded by development aid organizations and development banks for input to urban planning and government risk financing, but also by insurance companies, financial risk managers, and governments to better understand and manage earthquake risk.
Our partnership with Nasdaq is specifically aimed at making GEM’s models available to the risk financing/insurance industry through the OASIS Loss Modelling Framework (LMF), which will make it easier for users to include GEM models in their business workflows. In particular it will be possible for users to produce estimates of insurance and reinsurance losses via the OASIS financial module. In this way, the models should be more directly digestible by a broader range of users in this industry.
It is important to note that making models accessible through a commercial platform is a significant step for GEM, and one which our Governing Board examined for more than a year in order to ensure that our strategy would align with our core principles, and would in fact strengthen GEM’s mission to improve risk awareness and reduce risk globally. Thus, all models or data made available for commercial purposes will also be available for free for non-commercial, public-good application. Moreover, GEM will reinvest its share of any revenue into public good activities with particular emphasis on developing countries.
4. The first GEM model to be available on Nasdaq Risk Modelling is the Colombia Earthquake Model, can you tell us a little more about the methods and science behind GEM’s models?
GEM builds models following a transparent process, the results of which are made available as hazard and risk (ground-up loss) models through GEM’s free and open OpenQuake software. Models to be released on Nasdaq Risk Modelling leverage OpenQuake models to create a financial loss model that is tailored specifically for use by insurers for portfolio risk analysis.
GEM’s approach is to develop models with the best information available, and to work with local experts who have insights into all aspects of the models, from the underlying earthquake hazard through to the cost of building construction.
In South America, GEM has been working with dozens of public, private and academic organizations to facilitate local collaboration and to provide GEM’s OpenQuake hazard and risk analysis tools to universities, governments and practicing engineers. The model for Colombia is taken from GEM’s regional model for South America, which was first developed from 2013 to 2015 within the South American Risk Assessment (SARA) project funded by the Swiss Re Foundation.
In 2018, GEM further updated this model and made it available as an open product for ground-up loss calculations. The current GEM Colombia model is based on the regional one, but further improved with local information, such as construction practices in the different municipalities. GEM also incorporated feedback from more than 20 local experts regarding building classes and mapping schemes and gave particular attention to the three largest cities (Bogota, Medellin and Cali). The model also incorporates the results of a comprehensive and standardized approach for testing various components of the hazard models used for risk analysis.
5. What made you partner with Nasdaq Risk Modelling, and which of your models will be available on the service in the near future?
Fundamental to GEM’s success is the maintenance of the public-private partnership which is at the core of the Foundation’s governance and operational model. Our partnership with Nasdaq is part of a broader strategy to make GEM’s products more accessible to a wide range of stakeholders. Nasdaq, through its collaboration with OASIS LMF, provides a unique opportunity to provide models to the risk financing and insurance industry, to collaborate with the multi-hazard community of industry users and developers, and to have models tested and evaluated in the context of financial risk decision making. To date, we have developed or co-developed risk models for about 180 countries as ground-up loss models using the OpenQuake engine. We look forward to making more of them available in the Oasis LMF and with Nasdaq Risk Modelling for Catastrophes subject to user demand. Some of the country models on the priority list include South Africa, Chile, Mexico, Turkey, Indonesia and the Philippines, and we have several others under consideration.
6. What does this partnership mean to GEM’s stakeholders and the industry?
This partnership will pave the way for a broader range of insurers and financial risk managers across the globe to access models that can help address the protection gap. We foresee this as an opportunity to strengthen GEM’s engagement with the private sector, while at the same time continuing to be fully committed to our mission to serve the public good. Our partnership with Nasdaq should also serve to open channels and strengthen mechanisms for financial modelling in support of the broader agenda of the SDG and Sendai Framework to reduce risk worldwide. Together, we will be better placed to help communities better prepare for natural disasters, particularly in developing countries where risk information and capacity to assess risk is most needed.