MEXICO CITY, 27 August 2013 – Impact Forecasting, the catastrophe model development center of excellence at Aon Benfield, has launched a new flood scenario-based model for Mexico to quantify financial losses caused by river flooding.  Aon Benfield is the global reinsurance intermediary and capital advisor of Aon plc (NYSE:AON).

Flooding in Mexico over the last two decades has caused human and financial losses across the entire country, with severe events in 1993, 1998, 1999, 2005, 2007 or 2010. As such, flood in Mexico is considered to be one of the most significant natural perils, alongside earthquake and hurricane.

Now, the new model means that loss estimates for these events can be calculated to gauge the financial impact of their potential reoccurrence. Equally, scenarios can be generated for possible future events, for example, based on maximum possible magnitudes of a flood.

The hazard part of the catastrophe model is based on an event footprint that outlines the extent of the flood. This enables insurers to obtain a more realistic estimate of their specific exposure. 

The new tool reflects both locally-sourced data and the latest developments in hydrology and flood model development. Key features include:

• Modelling for the eight most exposed states, covering an area of 575,000 km²
• Digital Terrain Model (Source: INEGI Internet Site: www.inegi.org.mx) with a cell size of 30x30 meters

• Two sets of vulnerability curves with 100+ engineering based curves and 12 combination curves (engineering curves enhanced by real claims data).Historical dataset consisting of six floods: September 1993, September 1998, October 1999, October 2005, October-November 2007 and September 2010 + their Low and High options

Michael Hughes, CEO of Aon Benfield in Latin America, said: “As demand for catastrophe insurance and reinsurance increases in Latin America, catastrophe models need to develop alongside. In comparison to models in global peak catastrophe zones, the models in Latin America face the challenges of fewer historical events, reduced underlying data and less development resources.  In response, Impact Forecasting is stepping up by increasing its focus on models for the region – notably for its flood, earthquake and tsunami risks.”

Vaclav Rara, flood model developer at Impact Forecasting, added: “Floods in Latin America have recently caused widespread damage.  Therefore Impact Forecasting’s main goal is to bring more understanding to the insurance industry of this peril and help insurers to better manage their risk using the latest technology and hazard data.”

The new model is part of a suite of new scenario models to generate loss estimates for specific historic events.  It is integrated in ELEMENTS – Impact Forecasting's proprietary loss calculation platform – which allows the application of insurance conditions at varying levels and also quantifies different sources of uncertainty.