How Detailed Weather Data and Geospatial Tools Can Be Used to Increase Net Income

How Detailed Weather Data and Geospatial Tools Can Be Used to Increase Net Income Session 475 Tuesday, June 10 10:30 11:30 am IASA 86 TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW

How Detailed Weather Data and Geospatial Tools Can Be Used to Increase Net Income Andy Rice General Manager Enterprise Products Weather Services International The latest technological innovations and forecast enhancements within weather Explain the science. Help insurers understand what weather events and trends they can expect in 2014-2015

Using Radar Data to Track Tornados Washington, IL Tornado

Dual Polarity Radar Hardware upgrade to NWS radars Both horizontal and vertical pulses Improved particle size detection Enhanced accumulation products Better threat identification

Dual Polarity Radar

Dual Polarity Radar Tornado Debris Signature in May 19 th, 2013 Shawnee, OK Tornado

Tornado Debris Signature

Crowd Sourcing Data Observation network built of individual weather sensors provides hyper-local details of surface weather. Overview of weather sensor granularity for in Chicago, IL (red dots represent locations of NWS sensor network)

Crowd Sourcing Data Geographic distribution of Tweets containing the word tornado over a 24-hour period

15-30 Day Hurricane Forecasting Long-term tropical development forecasts provide quantitative risk analysis for the insurance industry

15-30 Day Hurricane Forecasting Probabilistic hurricane tracking Long-term tropical development forecasts provide quantitative risk analysis Multi-member ensembles with neural network weighting provides advanced insight

First El Nino Since 2009 I Periodic warming of the surface water in the eastern and central tropical Pacific Ocean Drives significant changes to the atmospheric circulation throughout much of the Northern Hemisphere The combination of large-scale suppression and increased wind shear produce an environment that is unfavorable for the development or intensification of tropical cyclones. Textbook El Nino signature Forecast of sea surface temperature anomalies for July 2014

Reduced Activity Probable for 2014 25% reduction in Atlantic tropical activity relative to other years NAMED STORMS HURRICANES MAJOR HURRICANES El Nino (21 years) 10.2 5.5 2.1 No El Nino (43 years) 13.2 7.3 3.0 35% reduction is US landfalling hurricanes relative to other years Landfalling Hurricanes El Nino (21 years) 1.1 No El Nino (43 years) 1.7 Risk of landfall reduced further with stronger events Landfalling Hurricanes Weak El Nino (7 years) 1.7 Moderate El Nino (7 years) 0.9 Strong El Nino (7 years) 0.7 All El Nino (21 years) 1.1

How Detailed Weather Data and Geospatial Tools Can Be Used to Increase Net Income Thank you for your time and attention. If you have questions specifically regarding this portion of the presentation, please contact: Andy Rice General Manager Enterprise Products Weather Services International Email: andy.rice@weather.com And next we will hear from Julie Serakos of BMS.

How Detailed Weather Data and Geospatial Tools Can Be Used to Increase Net Income Julie A. Serakos Executive Vice President and Head of Catastrophe Analytics BMS Intermediaries, Inc. Geospatial tools can be used to manage claim cost severity and reduce claims handling expense Geospatial tools can be used to stress-test the loss severity potential against a company s capital

Event Response for Claim Cost/Severity Reduction Geospatial tools help answer key questions Areas of high probability of hail occurrence for a severe weather event near Austin, TX in March 2014. Page 18

Event Response for Claim Cost/Severity Reduction View live weather updates from your desktop Page 19 Live weather April 29, 2014 Severe flooding in Pensacola, FL Wind, rain, tornado through MO, OK, AR

Event Response for Claim Cost/Severity Reduction Use detailed weather information to assess impact Late April 2014 severe storms Hail size Hail duration Rainfall Page 20

Event Response for Claim Cost/Severity Reduction Use detailed weather information to assess impact Hurricane Sandy Sustained winds Wind gust Track Rainfall Page 21

Event Response for Claim Cost/Severity Reduction Reduce claims handling expense Page 22

Event Response for Claim Cost/Severity Reduction Reduce claim severity Page 23

GIS Tools for Stress Testing Portfolio Loss Potential Create worst case realistic scenarios Tornado paths Hurricanes Terror bombs Flood Earthquake Page 25

GIS Tools for Stress Testing Portfolio Loss Potential Or use real shapes: Joplin, MO tornado 2011 FScale

GIS Tools for Stress Testing Portfolio Loss Potential Run thousands of actual shapes across the portfolio

GIS Tools for Stress Testing Portfolio Loss Potential Measure the impact on policyholder surplus La b e l 6491 8787 13379 1591 13014 GUPL Eve nt ID 8787 6491 13379 TIV 123,637,937 127,734,291 108,590,689 Risks 476 509 473 Low 30,613,451 29,187,745 26,280,458 Medium 41,846,501 40,439,546 35,602,130 High 61,216,245 59,625,238 51,692,824 PreCat Low 21,802,829 22,826,962 17,486,736 Medium 32,010,195 32,733,196 25,782,723 High 47,173,970 50,880,288 38,783,449 Mean Damage Ratios Post Cat % PHS Low 4,436,085 4,466,809 4,306,602 Medium 6,692,195 7,415,196 4,555,482 High 21,855,970 25,562,288 13,465,449 Low 5.4% 5.5% 5.3% Medium 8.2% 9.1% 5.6% High 26.8% 31.4% 16.5%

How Detailed Weather Data and Geospatial Tools Can Be Used to Increase Net Income Thank you for your time and attention. If you have questions specifically regarding this portion of the presentation, please contact: Julie A. Serakos Executive Vice President and Head of Catastrophe Analytics BMS Intermediaries, Inc. Email: JULIE.SERAKOS@bmsgroup.com And now for our next speaker, Tyrone Wilson.

How Detailed Weather Data and Geospatial Tools Can Be Used to Increase Net Income Tyrone P. Wilson, ASA, MAAA, CPCU ERM Actuary Brotherhood Mutual Insurance Company Practical applications of weather data and geospatial tools An insurers perspective

Actual events with current policy locations Moore OK 2013

Wildfire reporting RIM fire August 2013

Concentration Study to reduce exposure to CAT losses

Using PLRB data to assist with claims

How Detailed Weather Data and Geospatial Tools Can Be Used to Increase Net Income Thank you for your time and attention. If you have questions specifically regarding this portion of the presentation, please contact: Tyrone P. Wilson, ASA, MAAA, CPCU ERM Actuary Brotherhood Mutual Insurance Company Email: TWilson@brotherhoodmutual.com And now for the Q&A portion of our program.

How Detailed Weather Data and Geospatial Tools Can Be Used to Increase Net Income Q&A with Today s Speakers Andy Rice, General Manager Enterprise Products - Weather Services International Julie A. Serakos, Executive Vice President and Head of Catastrophe Analytics - BMS Intermediaries, Inc. Tyrone P. Wilson, ASA, MAAA, CPCU, ERM Actuary - Brotherhood Mutual Insurance Company

Please Complete the Session Evaluation Form on the Conference App and Include Your Conference Registration ID# to be Included in a Drawing for a Free Conference Registration for the 2014 Annual Conference! NOTE: Your Conference Registration ID# is Located at the Bottom Left Hand Corner of Your Badge. IASA 86 TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW