Introduction

Throughout our 15-year history, Risk Management Solutions (RMS) has focused our energy on helping clients, associates, and community leaders understand the potentially devastating damage from catastrophic events such as earthquakes, hurricanes, and floods.The insurance industry in particular relies upon our technology to quantify the impact of these events on their portfolio of risk, and in turn take steps to manage that risk.

Until recently, the primary focus of modeling catastrophic events has been on the potential damage to property: personal residences and contents, commercial and industrial buildings, along with business interruption. However, the events of September 11, 2001 have made it clear that not only does the United States have a new catastrophic peril to deal with in terrorism, but the U.S. population also faces grave danger from extreme natural events.

The purpose of this study is to utilize cutting-edge modeling techniques to provide workers compensation, life, and health insurance writers with key benchmarks for the potential risk of human casualties from a range of possible catastrophic events including earthquakes, terrorist attacks, industrial accidents, and infectious diseases. Since catastrophe modeling is fairly new to the life and health industry, RMS has provided some background material on how catastrophe models work, the input data required, and how the results are used to manage risk.

There are a number of challenges inherent to the modeling of catastrophic risk to humans. Unlike property risk, where buildings stay in a fixed location, people represent ‘mobile’ exposures that are likely to be in different places depending on the time of day and day of the week. Modeling mobile exposures has required the development of detailed databases on the movements, demographics, and insurance coverages of the U.S. population.

To assist in the development of this report, RMS enlisted the help of a number of leading experts from the life and health insurance industry.We would like to thank these companies for their assistance, without which this study would not have been possible.

Our hope is that this study will improve the industry’s understanding of the potential level of risk from human casualty, and lead to the reduction of casualties from major catastrophic events in the future through increased awareness, preparedness, and risk mitigation.

Hemant Shah

President & CEO
Risk Management Solutions

Sponsors

The views and analysis in this report are those of Risk Management Solutions.We are grateful for the comments, advice, and review of our steering committee members from the sponsoring clients.