FRANKFURT, Dec 16 (Reuters) - The world's biggest reinsurer, Munich Re (MUVGn.DE), and U.S. risk-modelling company RMS will work together to develop sophisticated new models to assess and price insurance risks such as hurricanes and earthquakes, the two companies said on Tuesday.
Munich Re said the non-exclusive, multi-year collaboration with RMS would allow it to improve its own in-house risk models and develop new insurance and capital market packages for its clients.
The deal also would allow RMS to extend the range of modelling products it offers clients, the two companies said in a joint statement. They declined to give financial details.
Munich Re has about 30 experts worldwide working on the modelling and management of accumulation risks — multiple risks linked to the same event — under the direction of August Proebstl, head of accumulation risks at the reinsurer's non-life corporate underwriting unit.
Proebstl declined to comment on specific projects and risks that would be the focus of the cooperation but said he expected to have concrete results to share with the rest of the insurance industry over the course of the next few years.
"We want to expand the frontiers of insurability for risks that have not been sufficiently modelled yet," Proebstl said.
Natural catastrophes such as hurricanes and earthquakes are likely to have caused economic damage of more than $200 billion this year, of which about $50 billion was insured, preliminary estimates from Munich Re showed.
This year was shaping up to be one of the biggest catastrophe years on record, with weather-related damage alone probably exceeding $100 billion, the company said.
The insurance industry depends on complex statistical models to underwrite risks, using both internal models as well as those supplied by companies such as RMS or EQECAT.
"This initiative with RMS is part of our strategy to make use of a collaborative network to complement our insights with external knowledge and translate these insights into intelligent risk management solutions," Munich Re board member Torsten Jeworrek, who is responsible for the company's reinsurance business, said in the statement.
"This will create value for our clients and shareholders," Jeworrek said.
Risk modelling moved into the spotlight in the 1990s after devastating damage from hurricanes, and efforts to improve the accuracy of models intensified after profits at many insurers were washed away by hurricane damage claims in 2004 and 2005.