“Billions” of Reinsurance, Catastrophe Models at Risk if Trump Budget Compromises Weather Satellites: NOAA
Cuts to the U.S. weather satellite program could have a direct impact on the reinsurance and catastrophe modelling industry, according to a study released prior to a proposal by the Trump Administration to gut the program’s budget.
“While difficult to quantify its direct value to the sector, [National Centers for Environmental Information] NCEI’s data is the backbone for many transactions in the reinsurance industry and without it billions of dollars of economic activity would be lost,” said a report in December by the National Oceanic and Atmospheric Administration (NOAA).
The report was issued three months prior to Friday’s article by the Washington Post that stated the Trump Administration was planning on cutting the NOAA’s budget by 17 percent. The report states that largest single cut to the NOAA’s budget would come from the National Environmental Satellite, Data and Information Service, which includes NCEI.
Later reports pegged the satellite division cut in particular at 22 percent, or $513 million.
“Access to NCEI’s data holdings is invaluable to the reinsurance industry. It’s foundational for the development of CAT models for weather-related perils, validating and calibrating third party and in-house CAT models, and resolving disputes that may arise between insurance and reinsurance companies,” the NOAA report in December argues. “As a necessary, impartial, and reliable source of information to the reinsurance sector, NCEI has earned the reputation as ‘the honest broker’ to the reinsurance sector.”
In particular, the NOAA cits access to its data in order for the industry to provide input and validity to their existing catastrophe models and to review and justify claims.
The report lists industry examples, such as:
- Primary, third party cat model vendors such as RMS, AIR, and CoreLogic us NOAA date in their event, hazard and exposure and vulnerability modules.
- Aon Benfield’s, Guy Carpenter and Munich Re’s use of NCEI’s IBTrACS data for cyclones and other hazards.
[The] reinsurance sector is a substantial user of NCEI’s hurricane track data (IBTrACS), severe weather data (SWDI), station data for temperature and precipitation (GHCN-D) the Billion Dollar Disasters Report and Storm Events Database,” the report states. “The maintenance of existing products, and provision of new data products is of critical importance to the sector, and this study has likely underestimated its value.”
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