Oasis Platform for Catastrophe and Climate Change Risk Assessment and Adaptation LAB INSTRUMENT ANALYSIS

June 27, 2016 The Lab is a global initiative that supports the identification and piloting of cutting edge climate finance instruments. It aims to drive billions of dollars of private investment into climate change mitigation and adaptation in developing countries.

AUTHORS AND ACKNOWLEDGEMENTS The authors of this brief are Chiara Trabacchi and Bella Tonkonogy. The authors would like to thank Dickie Whitaker, Tracy Irvine and Ralf Toumi, the proponents of the Oasis Platform, for their valued contributions and continuous support. The authors would also like to acknowledge the valued contribution of the following experts, in alphabetical order: Angelina Avgeropoulou (DECC); Simon Blaquiere (AxA); Ian Branagan (RenaissanceRe); Katie Carlton (DECC); Suzanne Carter (CDKN); Peter D’Souza (DFID); Kate Dowen (DECC); Julia Ellis (DECC); Stefan Eppert (KatRisk); Jennifer Frankel- Reed (USAID); Luzi Hitz (PERILS), Michael Hoelter (Deutsche Bank); Ari Hutala (CDKN); Robin Lang (RenaissanceRe); Wei-jen Leow (World Bank); Berit Lindholdt-Lauridsen (IFC); Karsten Loeffler (Allianz); Olivier Mahul (GFDRR); Trevor Maynard (Lloyd’s); Shadreck Mapfumo (IFC); Rosalie Mardsen (GCF); Leonardo Martinez (US Treasury); Jonathan Meagher (Allianz); Stephen Morel (OPIC); Utako Hanna Saoshiro (IFC); David C. Simmons (Willis); John Schneider (GEM); Alanna Simpson (GFDRR); Anselm Smolka (GEM); Claire Souch (SCOR); Raphael Stein (BNDES); Markus Stowasser (Allianz); James Thornton (JBA); Verena Treber (Allianz); Pan Tso-Chien (Nanyang Technological University); Jane Toothill (JBA); Daniele S. Torriani (IFC); Mark Weatherhead (Guy Carpenter);Emily White (GFDRR); and Vikram Widge (IFC). The authors would also like to thank Barbara Buchner, Ben Broche, Padraig Oliver, Elysha Rom-Povolo, and Jane Wilkinson for their advice, support and internal review, and Amira Hankin for graphic design. Analytical and secretariat work of The Lab has been funded by the UK Department of Energy & Climate Change (DECC), the German Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety (BMUB), the U.S. Department of State, the Netherlands Ministry for Foreign Affairs, Bloomberg Philanthropies, and The Rockefeller Foundation. Climate Policy Initiative serves as Lab Secretariat and analytical provider.

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ClimateFinanceLab.org CONTEXT

Insurance, in the context of broader disaster of natural disasters increasing as a result of climate risk management strategies, can increase change, the impact and cost of catastrophic communities’ climate resilience and reduce impact is expected to increase (Swiss Re, 2015). recovery times when disaster strikes. Total economic losses to property and infrastructure Although integral to improving the management from natural disasters have averaged around of, and recovery from, extreme climate events, USD 180 billion annually in the last decade, 70% high quality catastrophe risk models to assess of which (USD 127 billion or USD 1.3 trillion in and price the severity and probability of losses total over the 10 years) are uninsured (Swiss Re, are not readily available or adequately developed. 2015). Developing countries are more severely Key barriers include the costs associated underinsured relative to developed countries. with developing and maintaining models, the lack of standardized hazard, exposure, and Asian low-and middle-income countries, in vulnerability data, and the difficulty in accessing particular, have disproportionately low insurance local specialized knowledge. Under-developed coverage despite high susceptibility to natural insurance markets also inhibit demand for these disasters, with catastrophic economic and human products. consequences.1 With the frequency and severity 1 Based on EM-DAT (2016) data.

INSTRUMENT MECHANICS

By providing access to transparent the penetration of insurance and the use of and standardized analytics, the Oasis catastrophe models beyond the re/insurance industry to support risk-informed planning and Platform aims to improve understanding decision-making. and management of climate-related Proponents of the Platform began its development risks. Various elements of the Platform in 2012. They aim to roll out a pilot in one to three are currently being developed or low- and middle-income countries in Asia where tested, with the goal of piloting its use the use of the Platform as modeling infrastructure in support of insurance underwriting of choice could culminate in the underwriting of catastrophe risk insurance. Toward this end, in Asian developing countries. the Lab analysis focuses on demonstrating the value add of the Platform, identifying the most suitable context for the pilot, and suggesting an The Oasis Platform for Catastrophe and Climate implementation pathway. Change Risk Assessment and Adaptation (the “Platform”) is a set of tools that together aim to offerMAIN COMPONENTS a more transparent, robust and comprehensive approach for analyzing and pricing risk from The Platform comprises three main elements, extreme events. Ultimately, it aims to increase now at different stages of development:

ClimateFinanceLab.org 1 1. A Loss Modeling Framework (“LMF 3. Capacity building: Online training modules software”): An open source loss modeling will be available to modelers and model users software allows users to ‘plug-and-play’ a to increase their ability to develop and use range of standardized hazard, exposure, catastrophe risk models compatible with the and vulnerability data, as well as economic Platform and that can meet the needs of a and insurance data (e.g. policy coverage range of users, including the re/insurance and limits) to calculate potential economic industry. In particular, training modules could damages and financial risk associated with help users beyond the insurance industry to catastrophic events. The open source code understand the value of and use catastrophe of the calculator can interface with third party risk models. Workshops and training models and systems, enabling transparent courses linked to existing education and sharing and modification of assumptions and entrepreneurship programs would promote calculations as well as standardization in the knowledge sharing between organizations modeling community. Standards are critical to such as insurance companies and academic enable comparison across models’ results. institutions. Demonstration projects would also help to build know-how and develop The LMF software was first released in 2014, internationally recognized standards. This and is currently in a final testing phase. component is currently under development Proponents aim to (i) complete or improve a and the first training course is planned to be number of its elements (e.g. web interfaces freely available online by the last quarter of and services for managing model data, running 2016. analyses and retrieving results) and (ii) make its code fully open source to the broader public Proponents have recently initiated the development by the last quarter of 2016.2 of a final, fourth component, a global exposure 2. An e-Market: An open access, web-based database with the aim to provide standardized, marketplace with a matchmaking function accessible inputs for model development. that links demand for risk analytics (from STAKEHOLDERS INVOLVED e.g. re/insurers) with suppliers of hazard, exposure, and vulnerability data as well as A consortium of partner organizations provide catastrophe risk models, tools, and services. the broad range of industry experience, technical The e-Market aims to allow commercial and expertise, and outreach capacity that will help non-commercial users, such as government underpin the roll-out of the Platform in Asia and and academia, to acquire data and license elsewhere. These include: models either free, or for a licensing fee, • A non-profit company (Oasis LMF Ltd) depending on the preference of the data or managing and promoting the development, model supplier. Proponents established the use, and maintenance of the LMF software commercial limited company that will run the component for a group of 44+ member e-Market, and are now developing the related organizations including insurance and re- business plan and engaging with potential insurance companies and brokers,3 and an investors. They aim to launch it in November EU-funded public-private partnership driving 2016 at the 22nd UNFCCC Conference of the climate change innovation (Climate-KIC); Parties in Morocco.

2 Currently, this feature is available only to members and 3 Members include: Lloyd’s, SCOR, Ren Re, Guy Carpenter, approved associate members of the Oasis LMF Ltd Willis, Partner Re, Allianz, Swiss Re etc. See Oasislmf.org.

ClimateFinanceLab.org 2 Figure 1. The structure of the Oasis Platform. Better risk assessment achieved through the 3 components of the OASIS Platform:

1 Loss Modeling Framework (LMF) HAZARD DATA Assesses standardized data to EXPOSURE DATA OASIS RISK quantify potential economic LMF ASSESSMENT and financial consequences from VULNERABILITY DATA catastrophic events POLICY / LINE DATA

2 E-market SUPPLY: DEMAND: re-insurers & Links supply (of risk assessment models E-market data brokers models) with demand for these municipalities models by end users. businesses

3 Capacity Building Capacity building Training for model-makers and MODEL- MODEL model users to develop and use MAKERS USERS catastrophe risk models using RISK standardized approach and data. MODELS

• A pan-European public and private working group of practitioners from the disaster consortium of universities, research institutes, risk assessment, insurance and finance industries. and modeling companies developing new The RMMG, which aims to enhance collaboration models, methodologies, and business and efficiency in the understanding of risks from services (Oasis, 2015); extreme natural disasters, identified the Oasis • A for-profit company managing the e-Market Platform as a technological solution that could (Oasis Hub); underpin the collaborative efforts of the Group (RMMG, 2016a,b). • A commercial service company (Oasis Palm Tree Ltd) responsible for the capacity building BUSINESS MODEL component through the development of an online training course (Massive Open Online A €4.5 million grant supported the initial Course) for modelers and model users, development of the LMF software and new and ensuring the development of data and catastrophe risk models for Europe. models compatible with the Platform. A £30,000 annual membership subscription fee to Proponents are also members of the Insurance Oasis LMF Ltd supports the development of the Development Forum’s Risk Modeling and LMF software. Members also provide strategic direction and contribute to the growth of the Mapping Group (RMMG),4 a public-private Platform by developing or running catastrophe 4 Announced in November 2015, the Insurance Development Forum is a joint initiative of the insurance industry, development organizations and policy makers aimed at (1) resilience frameworks; 2) building out a more sustainable incorporating insurance industry risk measurement know- and resilient global insurance market in a world facing how into existing governmental disaster risk reduction and growing natural disaster and climate risk” (ICMIF, 2016).

ClimateFinanceLab.org 3 risk models and data on the Platform, and • Country potential interest and ability to supporting the establishment of common industry engage in the development of disaster risk standards for model development, data collection financial strategies and sharing. • Donor priorities as highlighted by existing and potential initiatives Revenue to sustain the e-Market will be generated through a fee on commercial licensing of models • Membership in regional political entities and possible advertising of products and services such as the Association of Southeast Asian relevant to climate resilience. The Proponents Nations (ASEAN). seek investors to support its further development. In order of ranking, Philippines, Vietnam, TARGET COUNTRIES FOR A PILOT Thailand, Indonesia, and Bangladesh emerged as the most suitable to undertake a pilot. To identify the most suitable countries in which Despite being highly prone to natural disasters, to demonstrate the use of the Platform in Asia, these countries have limited insurance coverage, the priority region for the pilot, we developed and disaster risk models are lacking or have the following criteria:5 severe limitations. In particular, models for floods • Exposure and vulnerability to weather and/or and typhoons, key perils in these countries, are climate events inadequate. • Maturity of the insurance market Of the five countries initially analyzed, Philippines, • Potential financial benefits stemming from risk Indonesia, and Bangladesh have garnered pooling the most interest from potential stakeholders, • Data and model coverage including governmental authorities, academic institutes, and insurance companies. The final list of countries for the pilot projects, however, will depend on confirmation of local interest as well 5 See Annex A for more details. as funding availability.

BARRIERS AND INNOVATION

The Platform could transform the BARRIERS ADDRESSED: THE PLATFORM IS DESIGNED TO ADDRESS way catastrophe risks are assessed, KEY OBSTACLES THAT INHIBIT RISK lowering costs to access transparent ASSESSMENT and standardized analytics, giving users The Platform is specifically designed to address the power to customize models, and key barriers inhibiting an adequate understanding of risk and, ultimately, the provision of insurance potentially facilitating penetration of products for climate-related events. The key insurance into vulnerable countries. barriers the Platform seeks to address include: • Lack of transparency on how risks are estimated. Most widely available models in the market do not allow re/insurers to fully

ClimateFinanceLab.org 4 understand how risks are quantified, or to and models are typically developed with access or manipulate underlying assumptions different standards and formats, which can or parameters. make it technically challenging and expensive New regulations in Europe and the U.S. for users to incorporate them in different (which are expanding to Asia)6 and improved analyses and to maintain multiple software 9 enterprise risk management approaches are platforms. The lack of a “common language” driving increased transparency and requiring also results in reduced confidence in risk re/insurers to demonstrate a comprehensive modeling outputs, and a reduced ability to understanding of risk. coordinate efforts (RMMG, 2016a). • Inadequate understanding of climate- • Transaction costs and a lack of visibility related risks. Limited sources of data and limit interactions between users and models in the market hinder users’ ability to suppliers of catastrophe risk data and gain a comprehensive, diverse view of a given models. On the side of financial modelers risk. This reduces ability to price insurance and re/insurers, costs are associated with products, including how much capital is finding local sources, such as academic required to meet the liabilities insured.7 institutes, to fill data or model gaps. Suppliers, in turn, may not have the ability • High model costs and lack of standards. or interest, capital, and demand-certainty Models have significant upfront capital costs needed to develop comprehensive software that are typically recovered through annual solutions that are required by re/insurers or license fees.8 Current costs also reflect the other users to model catastrophe risk. lack of a competitive modeling market and limited market efficiency. High costs inhibit INNOVATION: THE PLATFORM WOULD users beyond the re/insurance industry to ENABLE MORE TRANSPARENT, access and use risk assessment models. ACCESSIBLE, AND CUSTOMIZED Furthermore, in the current market, data ASSESSMENTS OF CLIMATE-RELATED RISKS 6 Insurance companies are now required to demonstrate a full understanding of the models and to “own” their view of To assess the innovative nature of the Platform risk. In Europe, Solvency II and, in the U.S, the Solvency we reviewed 18 comparative tools and initiatives10 Modernization Initiative, in fact, require insurers to file an and interviewed 18 experts from the re/insurance own risk solvency assessment (ORSA) with state regulators to demonstrate their ability to remain solvent under various sector, modeling industry, and development scenarios of risk (Willis Re, 2014); III (2013). Solvency II also community. raised the threshold of Regulatory Capital Requirements i.e. minimum amount of capital the insurer needs to cover its Our analysis shows the Platform goes beyond risks. Experts interviewed noted that many Asian countries are introducing compliance regimes, and that international existing tools and initiatives because it tackles insurers or reinsurers operating in these countries through these key barriers comprehensively and creates e.g. subsidiaries have to comply with these regimes. potential to increase insurance penetration. 7 Sources: experts interviewed and e.g. Fitch Ratings (2016) The Platform’s most innovative elements are: and ADB (2009). 8 According to literature reviewed and the experts we • Its open access and open source interviewed, catastrophe risk models can cost from character enables users to customize approximately USD 0.1 to 1+ million to build, depending on the country(ies) and peril(s) they cover. Model users and get multiple and transparent views (primarily re/insurers) typically license several models annually, with annual costs ranging from the low hundreds 9 Several experts interviewed referred to this issue as of thousands of dollars for smaller re/insurers to USD 1-8 “software spaghetti”. million for larger insurance houses. 10 See Annex B for details.

ClimateFinanceLab.org 5 of climate-related risks. The open source meet market demand for localized knowledge and “plug and play” characteristics, in of hazards, exposure and vulnerability and particular, allow users to modify the source stimulate the development of new models code and understand how damages and where lacking, helping reduce the uncertainty financial losses are calculated. By supporting associated with catastrophe models. minimum standards, the Platform would • Finally by facilitating the standardization of also allow interoperability between the data data and models across the industry, the and models made available, or users’ own Platform could lead to lower transaction data and models, and the open source LMF costs, increased demand and supply for software. Hence, the Platform will enable a these types of products, and enhanced transparent view of risk and customization comparability across models. of models by, for instance, changing • The Platform’s holistic approach to assumptions or input data. catastrophe risk assessment could • The LMF software has superior technical facilitate market entry to a broader range capacity and speed over comparable of users. By bringing together the various frameworks, and enables users to access elements needed to model catastrophe risk a more nuanced view of climate-related (hazard, exposure and vulnerability data risks, including improved understanding as well as software for calculating damage of the uncertainties associated with model and financial losses), with a marketplace results. Some experts interviewed noted and capacity development, the Platform that compared to existing tools, the LMF could lead to efficiency gains, stimulate software enables users to calculate damages competition, and allow users beyond the and financial losses quickly and objectively. immediate re/insurance industry to better Further, cloud-based availability will reduce understand climate-related risks. the need for individual companies, particularly • The Platform has the potential to empower smaller insurance companies in developing or developing countries’ stakeholders to emerging countries, to invest in the hardware maintain datasets and models to ensure and software needed to run complex models. their sustainability. In particular, capacity • Standardization and the e-Market would building and increasing the accessibility of the lower transaction costs by linking user interface will allow a wide range of users supply and demand for data and models. in developing countries to adopt – and adapt Connecting small and disperse providers of – the Platform’s tools for their own needs data and models with possible customers will over the long term.

ClimateFinanceLab.org 6 IMPACT

We estimate that the Platform could with proponents regarding their targets for the potentially reduce modeling costs by Platform; and (iii) analysis of publicly available insurance, economic, and financial data. 25-50%, catalyze USD 1-9 million in new model development investments, The results are preliminary and prepared for illustrative purposes only. and facilitate an additional USD 1.4 to 6 billion of property insurance coverage PRIVATE FINANCE MOBILIZATION AND REPLICATION POTENTIAL in the three potential pilot countries. Pilot impact

QUANTITATIVE MODELING The Platform could directly save re/insurers 25- 50% in modeling costs, as well as catalyze USD The upstream nature of the Platform implies 1 to 9 million in new investments for risk model that several steps are required to translate into development in the Philippines, Indonesia, and increased insurance penetration and enhanced Bangladesh, the three potential pilot countries climate resilience. To identify the steps and in Asia. accompanying metrics leading to impact, we developed and tested with experts a theory of We estimated the cost savings potential through change (see Annex C). This analysis highlighted expert interviews. Several re/insurers who that the Platform will have direct impacts on the estimated savings in the lower part of the range modeling market in terms of achievable cost noted that they may see some increases in in- reduction and the number of models available. house modeling costs associated with using the These direct impacts would subsequently Platform, as it requires some work for “assembly” translate into improved understanding of risks, of models and data. which in turn would lead to more risk underwriting and risk-informed investment decision-making. We estimated the total investments catalyzed for developing new models in the three potential pilot We developed estimates for the following countries based on a range of model development indicators: cost reductions; investment in model costs and assuming three new models (e.g., flood, development catalyzed; and market potential for typhoon, and drought) are built in each country insurance coverage. Our estimates are based on a by 2020 (see Table 1). Replication in other Asian combination of (i) expert interviews; (ii) discussions countries would catalyze additional investment.

Table 1: Assessing the Platform’s catalytic potential: investment in climate risk model development Cost to develop model Total cost for 3 new models in each of Range of Investment (depends on country & perils) 3 focus countries Lower USD 100,000 USD 900,000 Mid USD 500,000 USD 4,500,000

High USD 1,000,000 USD 9,000,000 Sources: expert interviews. Note that the cost of modeling depends on country, number and type of perils (some perils are more data intensive than others), and existing data availability, and that some of the more expensive models are multi-peril and multi- country.

ClimateFinanceLab.org 7 Transformative potential Figure 2: Assessing the Platform’s transformative potential: Insurance penetration in the potential pilot Assuming the Platform became the technical countries, 2014 data (property insurance as % of infrastructure supporting the underwriting of GDP). catastrophe risk in the three potential pilot 1% HIGH Income Countries’ countries, we estimate: Average (2014) • Up to USD 300 million in additional 0.8 catastrophe risk insurance coverage, if reaching a similar level to existing natural catastrophe risk pools. 0.6 • An additional ~USD 1.4 to 6 billion of property insurance coverage could be MIDDLE Income Countries’ generated by a broader catastrophe risk 0.4 Average (2014) insurance market in the selected countries, based on their current levels of economic LOW Income Countries’ Average (2014) development, insurance coverage, and 0.2 exposure to catastrophe.

We estimated the lower bound of market 0 PHILIPPINES INDONESIA BANGLADESH potential by examining the risk coverage that has been mobilized by national catastrophe risk pools and funds in Turkey, Taiwan, Mexico, and We evaluated the upper bound by analyzing the the Caribbean. We assume that the three focus gap between insured losses and total expected countries would form risk pools similar in scope (modeled) annual catastrophe losses (“estimated and penetration. natural catastrophe protection gap”). For the intermediate potential Table 2. Assessing the Platform’s transformative potential: market potential we analyzed the gap in for insurance insurance penetration at the country level compared to Potential Estimated 2014 level additional what would be expected Estimated level natural of property premiums Country underinsurance catastrophe based on benchmarks for premiums through a (USD bn) protection gap countries at similar levels of (USD bn) (1) risk pool (USD bn) (3) (USD bn) (2) development (“estimated level of underinsurance”). Philippines 0.40 0.06 0.20 3.20 Intermediate and upper Indonesia 1.00 0.18 0.90 2.50 bound methods are based on Swiss Re’s Sigma Report Bangladesh 0.06 0.04 0.31 n/a (2015b). Total 1.5 0.3 1.4 >6 Property insurance is used as a proxy as catastrophe risk-only insurance market data are not available. Sources: Swiss Re Sigma Reports 4/2015 and 5/2015, IMF World Economic Outlook October 2015, TREIF (2015), CCRIF (2015), TCIP (2012), IBRD/ World Bank (2012, 2013); 1/ Data for countries not included in Sigma 5/2015 are estimated based on available data and comparisons; 2/ Estimated based on other government based risk pool premiums; 3/ n/a= not available, as the protection gap for Bangladesh was not modeled in Swiss Re 5/2015.

ClimateFinanceLab.org 8 ENVIRONMENTAL AND SOCIAL IMPACT lacking, and facilitating reduction in modeling costs, the Platform holds the potential to open up The Platform could strengthen climate the use of catastrophe risk models and services resilience by helping to reduce the gap to users beyond the insurance industry, such between insured and actual losses stemming as to government authorities, city planners and from natural catastrophes, and by opening up corporate risk managers. We did not specifically the use of catastrophe risk modeling to users model this impact, but note the Platform’s potential beyond the insurance industry. By easing access to have impacts beyond those considered in our to data, stimulating model development where modeling are wide ranging.

IMPLEMENTATION PATHWAY

We estimate that it could take at least catastrophe risk models within the Platform in two years and seed funding of about 2-3 developing countries. The implementation pathway outlined under the Lab is consistent with USD 10-14 million to forge necessary and reinforced by the draft road map outlined by partnerships and finalize the underlying the RMMG. architecture for the Platform to be used Figure 3 describes the implementation pathway in support of an insurance mechanism for these pilot projects, which would run in parallel to both the completion of the Platform’s system components and a global exposure database to The piloting of the instrument in one to three of the improve data availability and accessibility. Pending identified Asian pilot countries – the Philippines, the finalization of the RMMG work plan and Indonesia and Bangladesh – rests on developing formalization under the Insurance Development strategic partnerships with suppliers and users of Forum, the pilot projects would be carried out in data and analytics in these countries and beyond, partnership with the RMMG and in collaboration as well as attracting investors. with other working groups of the Insurance The Platform proponents have already made steps Development Forum, particularly those focused in this direction by engaging with the Insurance on market development and capacity building of Development Forum’s Risk Modeling and Mapping the users of risk analytics. Group (RMMG), a working group established Agreements will also be established with the to increase risk understanding for disaster risk Global Facility for Disaster Reduction and finance and insurance solutions. The RMMG,Recovery and re/insurance companies such as co-chaired by the Global Facility for Disaster Willis Re, Lloyd’s and RenaissanceRe. These Reduction and Recovery and RenaissanceRe, partnerships would bring additional expertise and and composed of development organizations, contacts to the initiative, including relevant local re/insurance companies and modeling providers, partners (e.g. academic institutions, modeling is considering using the Platform’s open-source companies and local re/insurance companies), framework to test standards that would meet and support linkages with disaster risk finance the needs of the modeling community as well as and insurance solutions. Similar to an initiative run those of users and has proposed building open by the Platform in Europe’s Danube River Basin,

ClimateFinanceLab.org 9 Figure 3: Implementation pathway 2016 2017 2018

July - Sept Oct - Dec Jan - June July - June July -

Oasis System E-market soft launch at COP22 User consultations New interface released Development Fully open source

Global Data & Standards advanced by Insurance Global exposure Standards Development Forum (IDF) database released Development

Pilot Projects Key Partner Project Structure In-country Data & Availability & in Developing Agreements & Funding Launch Modeling Use Countries •IDF Risk •Funder(s) •Local partners •Build climate risk •Share data and modeling and identified identified and models (e.g., flood, models via Mapping Group •Country scoping engaged typhoon) on Oasis e-Market and (RMMG) roadmap missions •Assessment of Platform for each global exposure agreement, analytic and pilot country with database including role of •MOUs with pilot capacity needs of local partners (e.g., •Models available the Oasis Platform countries both suppliers academics, for risk-informed •MOUs with •Project and users modeling and decision-making implementing management & •Agreement on re/insurance and re/insurance partners (GFDRR, governance standards companies, governments) Willis, etc.) established •Trainings on •Advanced data collection, •Release new discussions with standards, & risk simplified user pilot countries assessment interface the pilot projects would be managed overall by an for the long-term sustainability of the investment Oasis+ Consortium program manager, in addition (see Table 3). to an advisory steering committee and local In particular, public investment to accelerate the project managers. development of new models for the selected INVESTMENT NEEDS pilot countries using the Platform standards and e-Market would begin to create positive We estimate that around USD 10 to 14 million in momentum and ensure the initiative would generate private and public investment would be needed development impacts. Public investment could to implement the pathway in the three potential also be used to develop training solutions and pilot countries. build interfaces with development organizations As an upstream solution that will become self- such as the World Bank and governments, which sustaining as it attracts more and more users, are currently developing disaster risk management the Platform would benefit from early stagefacilities and procuring new models for disaster development risk capital to demonstrate its risk finance and insurance initiatives. potential. The investment would support the Private investors such as insurance companies, development of the underlying system and philanthropic organizations, or tech companies several risk models, as well as capacity building could support the further development of the technical infrastructure, models, and e-Market.

ClimateFinanceLab.org 10 Table 3. Investment needs estimates for advancing the development of the Oasis system (above) and the developing country pilot projects (below)

Financing needs Activities (USD mln) Type of financing needs**

Oasis Platform system 3.4* e-Market Equity / concessional loans / convertible grants New user interface 0.3

Financing needs Activities (USD mln) Type of financing needs**

Supply 4.5 - 9 Grants & in-kind contributions Risk model development Capacity building for model development and adoption of 0.3 Grants standards Development of global exposure 0.5 Grants database Users 0.3 Grants Capacity building for model use Management costs Project management & 0.4 Grants & in-kind contributions oversight Total 10 - 14 Notes: (*) Climate-KIC has pledged support if a matching contribution is found. (**) Implementing partners will be expected to provide in-kind and cash contributions, as appropriate, to demonstrate buy-in.

IMPLEMENTATION CHALLENGES governance of the Platform and its non-profit and for-profit members could add further complexity, The biggest implementation risks may particularly given the absence of a centralized oversight mechanism or Board. In particular, as the stem from failing to rapidly achieve RMMG pilots the Platform in developing countries, a critical mass of models to attract a governance and project management structure users and attain financial sustainability will need to be established. This structure must due to complexity, coordination provide coordination among the projects, the development of standards and the global system, requirements, and the lack of while balancing the need for local stewardship and appreciation of the value of the Platform. keeping the flexibility that the Platform’s modular, open access structure provides.

Key challenges associated with implementing The need for rapid scale-up of quality data and the Platform are: models to demonstrate value to users means new partnerships must be established with key Complexity and coordination needs. As an suppliers and those engaged in the development integrated solution, the Platform has a number of ad hoc models to fill modeling gaps and achieve of distinct pieces that must be coordinated, a critical mass in the Asian region. To ensure user sequenced, and aligned. Establishing adequate trust, the Platform will need to develop a quality

ClimateFinanceLab.org 11 assurance process that can meet the needs of risk management approaches in Asia, including the full range of potential users, from re/insurers in the focus countries identified. Ultimately, a to planners. Ultimately, the value to users will be demand-driven demonstration and use of the in the offering of superior models built with local Platform linked through one of these mechanisms knowledge and expertise. will be the most important way for the Platform to reach scale and market trust. As the pilot projects Achieving financial sustainability could take progress, they will need to establish collaborations longer than anticipated . The Platform’s e-Market with these initiatives early on in order to be able to envisions reaching financial sustainability through meet the needs of potential users. charging user fees on commercial transactions. This business model relies on rapidly building a Non-insurance users may fail to fully appreciate significant user base with repeat customers. The the value of the Platform. One of the aims Platform should therefore focus on building a user of the Platform is to expand its use beyond re/ community through demonstrations, capacity insurance to companies and governments to building, and communication, in addition to enable better risk-informed decision-making. developing supply offerings. Early public Initialsector scoping will help determine whether these support will be important to help the Platform gain additional users have appetite and capability to a foothold and begin to scale. take advantage of catastrophe risk modeling. In addition, the Platform will require the cooperation An insurance product or other risk management of some users, particularly governments, to obtain facility requiring modeling may not materialize. data, which may prove difficult. Consequently, Currently there are a number of discussions awareness-raising and training activities will need to develop regional, national, provincial, or to engage with these potential users, and country municipal-level risk pooling mechanisms or other ownership of the pilot projects will be crucial.

KEY TAKEAWAYS

Our analysis of the key characteristics and • Catalytic: The Platform could reduce value of the Oasis Platform for Catastrophe modeling costs by 25-50% by lowering and Climate Change Risk Assessment and transaction costs and enhancing competition, Adaptation suggests it would enable improved thereby opening up the use of risk models assessment and pricing of catastrophe risks and to users beyond the re/insurance industry. ultimately lead to increased insurance penetration It could catalyze investments for USD 1-9 and investments in resilience. million in new model development in the Philippines, Indonesia, and Bangladesh. The Platform scores well against the Lab’s key Transformative: criteria for the following reasons: • The Platform could indirectly facilitate an additional USD 1.4 to 6 billion • Innovative: As an open source and open of property insurance coverage in the three access tool, the Platform could transform the potential pilot countries. It may also empower way natural disaster risks are assessed and local actors to develop and use their own how the catastrophe risk modeling market risk models and better manage risks, thereby works, lowering costs to access transparent creating a broader transformation in the climate-related models and empowering sector. users to customize them.

ClimateFinanceLab.org 12 • Actionable: Proponents have begun to To move forward, the Platform will require support develop strategic partnerships of relevance from The Lab and other stakeholders. This support for the pilots, notably with the Insurance could include financial backing, as proponents Development Forum’s Risk Modeling and are seeking to raise around USD 10 to 14 million Mapping Group and local stakeholders, to in private and public investment for the pilots, as test the Platform in 2-3 developing countries. well as connections with relevant partners such Further work is needed to forge additional as development banks or aid agencies, local in-country strategic partnerships on both governments, and investors. The partnerships the supply and demand sides of data and already established with key initiatives signal that modeling in order to help the Platform the Platform is addressing a crucial market need achieve a critical mass of users and gain and has strong potential to achieve its intended market acceptance to be used in investment impact. decision-making.

ClimateFinanceLab.org 13 REFERENCES

African Risk Capacity Agency (2015). Report of the Insurance Information Institute (III) (2013). U.S. Third Meeting of the Conference of The Parties of the Solvency Regulation. At: http://www.iii.org/issue- African Risk Capacity (ARC) Agency. ARC/COP3/ update/us-solvency-regulation. D018.1102_15. International Monetary Fund (IMF) (2015). World Asian Development Bank Disaster Risk Management Economic Outlook Database October 2015. web site. At: http://www.adb.org/themes/ [Accessed in March 2016]. environment/disaster-risk-management Irvine T. and Gipple D. (2015). Oasis+ Strategy and Asian Development Bank (2009). Natural Business Plan 2015 – 2018. April 2015. Catastrophe Risk Insurance Mechanisms for Asia and the Pacific: Main Report. At:http://www.adb. Lloyd’s (2012). Lloyd’s Global Underinsurance org/publications/natural-catastrophe-risk-insurance- Report. October 2012. At: https://www.lloyds.com/ mechanisms-asia-and-pacific. news-and-insight/risk-insight/library/understanding- risk/global-underinsurance-report. Climate-KIC web site, at http://www.climate-kic.org/ press-releases/major-breakthrough-in-prediction-of- Mahul O. (2016, forthcoming). Toward a Regional financial-damage-as-a-result-of-natural-catastrophes. Approach to Disaster Risk Finance in Asia. Discussion Paper. The World Bank Group, Disaster FitchRatings (2016). Global Reinsurance Risk Financing and Insurance Program. Guide2016. At: http://content.yudu.com/ web/1aa0x/0A3wlkq/Fitch16/flash/resources/22.htm Munich Re (2016). Press Release: El Niño Curbs Losses from Natural Catastrophes in 2015. Guha-Sapir D., R. Below, Ph. Hoyois [cited as EM- Published online January 4, 2016. Accessed online DAT, 2016]: International Disaster Database – www. at http://www.munichre.com/en/media-relations/ emdat.be – Université Catholique de Louvain – publications/press-releases/2016/2016-01-04-press- Brussels – Belgium. release/index.html.

Hijioka, Y., E. Lin, J.J. Pereira, R.T. Corlett, X. Cui, Munich Re (2013). Severe Weather in Eastern Asia: G.E. Insarov, R.D. Lasco, E. Lindgren, and A. Surjan, Perils Risks Insurance. Knowledge Series: Natural 2014: Asia. In: Climate Change 2014: Impacts, Hazards. Adaptation, and Vulnerability. Part B: Regional Aspects. Contribution of Working Group II to the Fifth Oasis (2016). Newsletter 2016. At: http://www. Assessment Report of the Intergovernmental Panel oasislmf.org/files/7414/5613/5801/Oasis_ on Climate Change [Barros, V.R., C.B. Field, D.J. Newsletter_2016.pdf. Dokken, M.D. Mastrandrea, K.J. Mach, T.E. Bilir, Prnewswire (2016). Formation of the Insurance M. Chatterjee, K.L. Ebi, Y.O. Estrada, R.C. Genova, Development Forum by the United Nations, the B. Girma, E.S. Kissel, A.N. Levy, S. MacCracken, P.R. Mastrandrea, and L.L. White (eds.)]. Cambridge World Bank Group and the Insurance Industry. At: http://www.prnewswire.com/news-releases/ University Press, Cambridge, United Kingdom and formation-of-the-insurance-development-forum-by- New York, NY, USA, pp. 1327-1370. the-united-nations-the-world-bank-group-and-the- International Cooperative and Mutual Insurance insurance-industry-300252974.html. Federation (ICMF) (2016). Formation of the Insurance Development Forum by the United Nations, the Risk Modeling and Mapping Group (RMMG) (2016a - unpublished). Insurance Development Forum - Risk World Bank Group and the Insurance industry. April, Modelling and Mapping Project Concept Note. 18, 2016. At: http://www.icmif.org/news/formation- insurance-development-forum-united-nations-world- Risk Modeling and Mapping Group (RMMG) (2016b bank-group-and-insurance-industry. forthcoming). Insurance Development Forum - Risk Modelling and Mapping Group (RMMG) Road Map.

ClimateFinanceLab.org 14 Simmons D. (2011). Catastrophe Modeling in the The International Bank for Reconstruction and New Regulatory Environment – New game, new Development/The World Bank (2013). FONDEN: rules. Presentation in Singapore, 18 January 2011. Mexico’s Natural Disaster Fund. Disaster Risk Financing & Insurance Case Study. Swiss Re (2015a). Sigma No 4/2015: World Insurance in 2014: Back to Life. The Turkish Catastrophe Insurance Pool Compulsory Earthquake Insurance (TCIP) (2012). Swiss Re (2015b). Sigma No 5/2015: Annual Report 2011. Underinsurance of Property Risks: Closing the Gap. Thomas V., J.R. Albert, R. Perez (2013). Climate- Taiwan Residential Earthquake Insurance Fund Related Disaster in Asia and the Pacific. Asian (TREIF) (2015). Annual Report 2014. Development Bank: e-Quarterly Research Bulletin (Vol 4, No 3). The Caribbean Catastrophe Risk Insurance Facility (CCRIF) (2015). Annual Report 2014-2015. CCRIF United Nations General Assembly (2015). Report SPC. of the Secretary-General on the Implementation of the International Strategy for Disaster Reduction. The International Bank for Reconstruction and A/70/282, Seventieth Session. Development/The World Bank (2012). ASEAN: Advancing Disaster Risk Financing in ASEAN Willis Re Analytics Review (2014). Oasis and Member States: Framework and Options for Open Platforms: A mirage, or The New Norm of Implementation. Catastrophe Modeling? Issue 5, 2014.

The International Bank for Reconstruction and The World Bank, World Development Indicators Development/The World Bank (2014). Brief: Database. At http://data.worldbank.org/data- Disaster Risk Management. Published online catalog/world-development-indicators [accessed October 16, 2014. Accessed online at: http:// March 20]. www.worldbank.org/en/region/eap/brief/disaster- risk-management The World Bank (2016). Solving the Puzzle – Written Contributions. The Current State of Risk The International Bank for Reconstruction and Information: Models & Platforms. At: https:// Development/The World Bank (2012). FONDEN: understandrisk.org/publication/solving-the-puzzle- Mexico’s Natural Disaster Fund – A Review. written-contributions/.

ClimateFinanceLab.org 15 ANNEX A – SELECTION OF PILOT COUNTRIES

Criteria developed and evaluated to identify potential pilot countries in South and Southeast Asia.

Criteria & Sub-Criteria Notes Sources Countries’ exposure and Historical impacts of climate hazards EMDAT Database 1990-2015 vulnerability to climate events Expected Losses & Economic Expected Annual economic losses World Bank (2012) Impact as % of GDP Income level as proxy for adaptive World Development Indicators, The Income Level capacity World Bank # non-life insurance market actors

Maturity of the insurance market (moderate amounts indicate healthier World Bank (2012) market) Property Insurance penetration (USD Insurance penetration Swiss RE SIGMA (2015) premiums as % of GDP) Comparison to benchmark insurance Underinsurance based on World Bank (2012), Swiss RE SIGMA level benchmark (2015) Income level as proxy for ability to World Development Indicators, The Income Level pay for insurance World Bank Proxy => 200 year probable Potential financial benefits maximum loss in $m and as % of World Bank (2012) stemming from risk pooling GDP. Coverage by existing models and Expert interviews; comparative Data and model coverage existing data initiatives such as Assessment (see Annex B) OpenDRI and PERILS Survey of existing & potential Expert interviews; comparative Donor priorities initiatives Assessment (see Annex B) Country potential interest and ability Survey of existing & potential Expert interviews; comparative to engage in the development of initiatives Assessment (see Annex B) disaster risk financial strategies Membership in regional political entities such as the Association of Member of ASEAN www.asean.org Southeast Asian Nations (ASEAN)1

ClimateFinanceLab.org 16 ANNEX B – ASIAN DISASTER RISK FINANCING AND INFORMATION ECOSYSTEM

Table B.1: Data and modelling initiatives in Asia

OASIS Name Description Comparability/ Coverage Source Complementarity

• IDF working group established to increase Components: collaboration in • global exposure Country: the understanding • Insurance Development database, Global. Seeking of natural hazards • Willis Press release Forum Risk Modelling e-Market to pilot in 2-3 risk by developing End users: re/ developing Interview with staff and Mapping Group model and data • insurance, countries standards and planners, scientists methods of interoperability.

• Peril: Natural • Components: global exposure hazards (floods, Data provider of windstorms and • database, natural catastrophe earthquake) e-Market industry loss Country: more than End users: insurers • and exposure • 15 EU countries- and reinsurers, PERILS website PERILS information for Now expanding to Insurance-Linked Interview with key hazards such Asia (Indonesia, Securities /Industry Philippines, PERILS staff as floods and Loss Warranty windstorms. Thailand, Taiwan investment funds with focus on and other financial institutions. typhoon, flooding, earthquake). Multi-stakeholder • Components: initiative to develop • global exposure Natural Catastrophe exposure and database, Country: NatCatDax research Data and Analytics loss database, • e-Market Philippines, programme Exchange starting with three End users: re/ Thailand, Indonesia Asian capital cities • Interview with staff (NAT CAT DAX) insurance, city (Manila, Bangkok, planners and Jakarta)

• Open source web-based hazard and vulnerability risk assessment Peril: Natural tools, data, and • Components: hazard community for • Data and (earthquake) earthquake Global Earthquake modeling facility; Country: Global modeling, and • GEM website Model (GEM) matchmaking; and (models are training. It allows Interview with GEM OpenQuake Platform training developed users to combine End users: public by regional staff and use open- • sector partnerships – source applications none yet in S.E. with homogenized Asia) data and models for integrated assessment of earthquake risk.

ClimateFinanceLab.org 17 UNISDR Science and • Research • Components: programme Technology Partnership global exposure to improve database, Country: for the Implementation • Aitsi-Selmi et al 2016 access to and e-Market Global of the Sendai • standardization of • End users: Framework exposure data. scientists, planners

• Open data platforms developed to increase public access to risk Component: Data Peril: Natural Open Data for information • • and matchmaking hazards Resilience Initiative through community facility Country More than OpenDRI website (OpenDRI) risk mapping and • End users: policy- 20 developing 2 risk visualization. • WBG (GFDRR) makers countries • Focused on data and standardization, not risk assessment

• Free and open source software that produces natural hazard impact scenarios for better planning, • Peril: Natural preparedness and • Component: Data hazards (flood, response activities. facility and training tsunami, InAsafe website It allows to End users: policy- earthquakes, In A Safe • • GFDRR website rigorously makers, disaster landslides & combining data managers and volcanic). from scientists, planners • Country: local governments Indonesia. and communities to provide insights into the likely impacts of future disaster events.

• Multi-stakeholder initiative led by • Components: USAID to provide global exposure White House Fact Climate Services for climate services database, Country: • Sheet Resilient Development – including e-Market • Bangladesh Interview with staff access to data • End-users: – to developing planners countries.

ClimateFinanceLab.org 18 Table B.2: Disaster climate-related risk financing initiatives in the three pilot countries

Sponsor Initiative Coverage

Regional Programme on Disaster Risk Financing and ASEAN ASEAN Insurance countries Southeast Regional Facility for Disaster Risk Finance Asia Global Facility for Disaster Reduction & Recovery (GFDRR)/ Sovereign risk financing and property CAT risk insurance Indonesia Sub-national joint catastrophe insurance facility for local Philippines World Bank Group governments National Sovereign DRFI Strategy Indonesia Global Index Insurance Facility Typhoon Index and Indemnity Insurance Philippines Developing a disaster risk financing capability (disaster risk Indonesia & Asian Development Bank financing options) Philippines Pilot Program on Weather Index-Based Crop Insurance Bangladesh

ClimateFinanceLab.org 19 Table B.3: Commercial models available in Asia

OASIS Comparability/ Name Activities Coverage Source Complementarity

• Peril: Natural and human- made catastrophes Country: 100 countries Cloud-based exposure • • Components: LMF + plug worldwide; South and risk management • in through ‘Developer Korea, and Taiwan. It platform. It allows open Network’ that allows client is developing models modeling to enable and model developers to for Malaysia, China and clients to customize and integrate or develop tools, Japan. shape their own models, applications, services, & Asia coverage:4 RMS website RMS analytics and tools. Aims • models earthquake, tropical RMS(one) website; RMS(one) to help clients to take End users: more than cyclone & pandemic. RMS (2014) control and develop own • 400 insurers, reinsurers, Philippines (earthquake view of risk trading companies, & typhoon under Developed by RMS, one • investment banks, lenders, development), Vietnam of the two world’s primary industry organizations, (typhoon under catastrophe risk modeling governments and NGO. development); Indonesia, company.3 Malaysia and Thailand (earthquake under development)

• Open platform offering AIR peril: Natural hazard and exposure data • Components: LMF, and human-made for modeling losses and • e-Market, allowing plug catastrophes. Covers support underwriting5 in i.e. the integration of also agriculture-related Allows users to import • non-AIR hazard data and risks via crop models and own or third-party models climate change enabling data providers that End users: insurers, to explore the sensitivity AIR have agreements with • reinsurers, brokers, of catastrophe risk to a AIR website AIR Touchstone Touchstone development finance changing climate • Allows modification of institutions (World Bank) AIR country: >90 countries assumptions • worldwide Developed by AIR, one of and other financial • institutions, and Asia coverage: Tropical the two world’s primary • governments. cyclone in China, India, & catastrophe risk modeling Philippines (agriculture in software and services China) company

ClimateFinanceLab.org 20 OASIS Comparability/ Name Activities Coverage Source Complementarity

• Peril: Natural and human- • Platform for catastrophe made catastrophes risk models across several • Countries: >96 worldwide CoreLogic (former hazards and regions • Asia coverage: EQECAT) • Loss modeling based on • Components: LMF earthquake, cyclones and RQE - Risk probabilistic analyses • End users: Insurance, typhoon. CoreLogic website Quantification & that evaluate all potential reinsurance and financial • Typhoon in, among the CoreLogic (2015) Engineering loss-causing catastrophic clients others, China, Philippines events —both gross & Thailand. Earthquakes and net of reinsurance in, inter alia, India, contracts Pakistan, Philippines and Thailand.

• Open and customizable platform for catastrophe loss modeling. Exposure data can be analyzed at both an aggregated and individual level using primary insurance policy conditions • Allows implementation of customized solutions, model validation and • Peril: Natural and human- quantification of risks. made catastrophe risks Enables to understand Components: LMF Country: US, Europe, Asia how hazards and • • Impact Forecasting End users: mostly Asia coverage: Pan-Asian vulnerability components • • Aon website ELEMENTS insurance & reinsurance typhoon model are connected to help companies Supports some existing understand model • insurance pools (New outputs, thereby how cat Zealand, Romania) models work; • Developed by Impact Forecasting, a model development firm embedded in a reinsurance brokerage (Aon Benfield). The company focuses on developing models in under-served regions and hazards.

ClimateFinanceLab.org 21 OASIS Comparability/ Name Activities Coverage Source Complementarity

• Flood specialists • Provider of flood hazard maps, catastrophe models • Perils: Flood including and other flood-related River, surface water, sea data surge, groundwater and • Flood hazard maps in all man-made flood perils countries worldwide • Countries: Mapping for JBA Risk • JCalf loss modeling • Components: LMF all countries globally; JBA Risk Management Management platform provides an open • End users: Mostly insurers probabilistic models for website JCalf and flexible architecture, and reinsurers selected territories Input from JBA staff based on full Monte Carlo • Asia coverage: Mapping sampling. User can adjust for all Asian countries; and test assumptions probabilistic models in • JBA also has agreements Thailand, India, Sri Lanka for model provision with and Malaysia third-party platform providers

• Models for risks assessment in support of underwriting • Peril: Earthquake, flood, windstorm. • Developed by first Asian Components: LMF; (Singapore)-based and • Country: ASEAN countries Catalytics Asia training • focused open platform Asia coverage Catalytics website Catalytics End users: insurers and • : flood cat modeling consultancy • models for Thailand and reinsurers and developer company Philippines, working on (RMS partner). It focuses Vietnam. on maintaining flexibility for users

• Open loss fully probabilistic modeling platform. It offers a complete toolkit for exposure data management, modeling, and portfolio reporting • Allows customization of inputs • Connects users to pre- vetted experts to procure additional data + models Components: LMF, Data Delivers (i) transparency • Peril: natural hazards KC&Co website • facility and e-Market/ • Karen Clarke & as assumptions underlying Country: U.S.; other RiskInsightsConnect matchmaking web • Company the models are fully visible website service6 countries not specified RiskInsight to users; (ii) control as Asia coverage: not Bloomberg Business End-users: insurers, • it models assumptions • website reinsurers specified can be customized and (iii) efficiency as it allows building proprietary view with one comprehensive platform. • Developed by Karen Clarke & Company, a firm that in addition to provide catastrophe models develops processes to validate catastrophe models.

ClimateFinanceLab.org 22 OASIS Comparability/ Name Activities Coverage Source Complementarity

• Open source probabilistic natural catastrophe damage model, that also calculates averted damage (benefit) from adaptation measures of any kind • Based on 4 elements: • Assets (i.e. geographical distribution of people, houses, activities, public infrastructure • Damage functions (relating impact to economic Peril: storm, cyclone, consequence - or any Components: LMF • • earthquake, volcano Climada other pertinent metric, like End-users: adaptation Climada GitHub page • Country: global (1 km planners, insurers • people affected) resolution) • Hazards (currently implemented are: tropical cyclones, storm surge, torrential rain, earthquake, volcano and meteorites on a global yet local (1km) resolution, plus winter storm in Europe and flood and mudslides in experimental stage) • Adaptation measures (i.e. improved building codes, seawall, sandbags, reefs, mangroves).

• catastrophe modeling company; focus on flood Perils: and wind risk • flood, wind. Flood includes inland and open architecture Components: LMF • • typhoon KatRisk allows understanding End users: insurers, KatRisk website • Country/Region: U.S., of assumptions and reinsurers • Asia (other regions modification expected) • open source code in R shiny

ClimateFinanceLab.org 23 TABLE B.4: Commercial models supporting sovereign risk pools in other regions

OASIS Name Description Comparability Coverage Source • Multi-Hazard Parallel Risk Evaluation System (MPRES) platform7 for the production of a wide range of real-time hazard and impact products, as well as long-term hazard and loss assessments for tropical cyclone, earthquake and severe weather.8 Kinetic Peril: natural Developed by Kinetic Analysis, a multi- • Analysis Corp. • hazards – tropical Kinetic model risk assessment and extreme MPRES Component: LMF cyclones and website, weather impact forecasting company • Caribbean End users: earthquakes. CCRIF Q&A engaged by CCRIF to develop the • Catastrophe sovereigns, Country: p. 15 models underpinning the pool. Kinetic • Risk Insurance reinsurers Worldwide – CCRIF Annual provides rainfall estimates that underlie Facility Caribbean for Report (2010) the catastrophe parametric insurance (CCRIF) CCRIF. products offered by CCRIF. • According to Kinetic’s website, they address the transparency issues of other commercial providers by using techniques implemented from published scientific literature, with citations available. • Software platform used to trigger payouts from Africa Risk Capacity (ARC). It estimates the impact of observed weather data on vulnerable populations. • It uses a rainfall-based drought index ARC website WFP (WRSI) combined with a scaling factor. • Component: LMF WFP Africa • It relies primarily on satellite-based rainfall • End users: • Peril: drought presentation RiskView data as the primary variable for identifying sovereigns and • Country: Africa on Africa drought and triggering payouts. reinsurers RiskView • It is customized by each ARC (here) participating country. • Developed by World Food Programme to underpin the Africa Risk Capacity (ARC) pool for droughts. • Pilot supported by the World Bank Group to place a portfolio of catastrophe swap contracts that transferred catastrophe risk from five Pacific Island Countries.9 • Trigger: modelled-loss trigger—losses estimated based on physical event • Peril: Tropical parameters cyclone, AIR Worldwide and Applied GeoScience earthquake, and • Component: LMF, Division (SOPAC) of the Secretariat of • tsunami Pacific Data facility World Bank Catastrophe Country: the Pacific Community (SPC) provided End users: • Pacific website Risk Insurance technical support. • Islands (Marshall sovereigns, GFDRR (2015) Pilot Islands, Samoa, • AIR developed country-specific cat risk reinsurers models (tropical cyclones and storm Solomon Islands, surge, earthquakes, and tsunami) from Tonga and scratch under the initiative. WB supported Vanuatu). significant data collection, in particular for exposure module as parametric triggers require reliable, independent sources of real-time event data of sufficient scope to calculate loss.

ClimateFinanceLab.org 24 Footnotes risk complies with underwriting guidelines and, ultimately, 1 We included these criteria because the sponsorship of enables to validate models. (v) Geospatial Analytics allows ASEAN could be relevant for the development of regional integrating exposure, hazard, and loss information; (vi) The risk insurance pool scheme or replication of national Underwriting Mode provides detailed and customizable 2 It maps tens of thousands of buildings and urban information about policies under consideration. infrastructure, providing more than 1,000 geospatial 6 RiskInsightConnect gives access to global experts, detailed datasets (WB website). data, and advanced model components to allow users to 3 RMS models and data in the context of climate-related peril, customize model assumptions and build own models by cover tropical cyclone, tsunami, windstorm, winter storm, peril region. RiskInsightConnect is automatically available severe convective storms and flood. when licensing RiskInsight. 4 Among the others, it operates in partnership with flood 7 Where no reliable published asset data are available, for loss modeler JBA Risk Management, Asia Pacific specialist Risk assessment it uses a global, high resolution proxy exposure Frontier and Catalytic who have specific expertise/models in data base derived from recent satellite imagery, population Asia. and socio-economic statistics. 5 Air Touchstone key components: (i) ‘Exposure View’ enables 8 Kinetic also provides Real Time Forecasting System (RTFS) through interactive maps to grasp the geographic extent to enable enables all active members of CCRIF to access of portfolio and accumulations of risk on a global scale; real-time estimates of the expected hazard levels and ‘Data Quality Analytics’ enables to measure and improve impacts on population for all tropical cyclones during the your data quality through a validation and benchmarking Hurricane Season (CCRIF, 2010). The RTFS system is built system; (iii) ‘Loss Analytics’ to assess losses; (iv) ‘Hazard on our MPRES hazard modeling platform. Analytics’ enables to identify the catastrophe hazards that 9 The form of the contract is a catastrophe swap contract; the threaten individual property locations as well as check if a World Bank intermediates the risk and mirrors transactions with the international reinsurance markets.

ClimateFinanceLab.org 25 ANNEX C – OASIS PLATFORM THEORY OF CHANGE

ClimateFinanceLab.org 26