ERN Natural Risk Assessment and Risk, Engineering and Development Launch Earthquake Risk Model on Nasdaq Risk Modelling for Catastrophes
ERN Natural Risk Assessment, in conjunction with Risk, Engineering and Development (RED), recently launched a pan-European earthquake risk model on the Nasdaq Risk Modelling for Catastrophes service and plans to implement additional models covering earthquake risk across the Latin America region, including in Mexico, Colombia, Chile and Peru. The agreement between ERN, RED and Nasdaq increases the number of vendors and catastrophe risk models of choice on Nasdaq’s SaaS offering for insurers and reinsurers, now including risk models from 12 vendors covering over 300 country perils.
The Mexico City-based ERN and its Italian counterpart RED’s jointly developed European earthquake risk model has been implemented on Nasdaq’s cloud-native SaaS solution powered by the latest version of the Oasis Loss Modelling Framework, which is an open-source framework for developing, deploying and executing catastrophe risk models. In addition, ERN will also launch its exclusive Mexico earthquake risk model on the Nasdaq platform in the near future.
“Both models rely on state-of-the-art hazard modelling,” said Mario Ordaz, President of ERN. “They have abilities to manage exposure data from different types of buildings and [insurance] coverages. They also have a sophisticated vulnerability module, which relates to the earthquake’s intensity and damages.”
Founded in 1996, ERN specializes in regional, niche risk models, ranging from earthquake and hydrometeorological hazard models to design and construction engineering models, for Mexico as well as Latin America. The ERN models are the regulatory models in use in Mexico, Colombia and Peru. The company’s work with Pavia, Italy-based RED has allowed ERN to expand its risk modelling to Europe and the Pacific Islands. Since first reaching an agreement to develop a pan-European earthquake model in 2015, the consortium’s activities have expanded, including providing modeling and risk management services to the Caribbean Catastrophe Risk Insurance Facility.
The Introduction of New Industry Standards Facilitate Access to Niche Models
Given ERN’s regional focus and highly specialized models, Ordaz has been closely following the development of the Oasis framework, recognizing the value it provides the company and the broader industry.
“The Oasis framework was essentially designed to make available to users in the insurance industry models from smaller companies and niche companies that have not [previously been] feasible,” said Ordaz. “The risk computation engine and the handling of the input and output data from and to the user are done by the modelling framework in a standardized way—that’s a key point that distinguishes the new modeling framework.”
Having a uniform method for risk and data computation is critical for an industry that continues to see modeling companies becoming more specialized in specific areas, such as hail or flooding, and regions.
“With this framework powering the Nasdaq Risk Modelling for Catastrophes service, Nasdaq was an excellent partner to help us with the implementations and sales of our models, making them available for a wider audience of insurers and reinsurers,” Ordaz said.
Ordaz noted that ERN plans to bring more risk models to the Nasdaq platform, a relatively easy move given that all of the models use the same data generation engine.
“We will be deploying more models very fast in the future,” Ordaz said. “We think we will start with all our Latin American earthquake models, so Central America, Colombia, Ecuador—essentially the whole subcontinent, with the exception of Brazil, for which earthquakes are not as prevalent.”