Sunstone is excited to announce that we have become an authorised partner of GEM, the Global Earthquake Model foundation, to bring the GEM models to the insurance industry.
GEM have chosen to partner with Sunstone due to our technical expertise, our long experience with the insurance industry and our wish to cooperate with GEM in an open and transparent manner. This ensures that Sunstone’s clients receive a trusted and informed solution as well as to ensure the long-term sustainability of GEM.
We are pleased to announce the publicly-available implementation of the Dominican Republic GEM model in the Oasis Flamingo platform. More information is available here.
The Problem Worth Solving
(Re)insurance companies, hedge funds and investment banks seeking exposure to natural catastrophe risk are increasingly searching for more cost-efficient and transparent ways to understand and model risk, while minimising the need for large teams of in-house experts. In the current soft reinsurance market, there is pressure on companies to reduce modelling costs and therefore there exists an interest in seeking models outside of the expensive main vendors. Such models are often less mature and require greater evaluation and customisation, a task not possible without expertise.
The GEM foundation (https://www.globalquakemodel.org/) has a mission to achieve global coverage for high-quality open-source seismic risk models, which have the potential to become an attractive solution to insurers due to their modern and rigorous scientific basis, geographic completeness, transparency, customisability and cost effectiveness. Due to these factors, the interest from the private sector is rapidly increasing.
However there exists a gap between the GEM risk models and their application for risk assessment in the insurance industry. The reason for this gap is that GEM, as a non-profit foundation, is providing open risk management tools for the public and private sectors and therefore the models may require some tailoring to become more useful to the insurance industry. In particular, GEM’s OpenQuake platform is lacking the financial engine to model complex insurance and reinsurance policies. Also, due to cost pressures, many insurers would prefer not to introduce additional modelling platforms into their IT infrastructure, but rather prefer to have access to third-party models within their current systems.
There exists an opportunity for GEM models to be customised for different applications, but in a framework that does not distract GEM from its primary focus. There is a need to bridge the gap between the GEM models and the insurance industry in a way that can assist GEM’s sustainability within these constraints.
Sunstone provides two products for clients:
- On-demand consulting in all areas of nat-cat risk, including exposure handling, model evaluation, customisation and implementation as well as portfolio aggregation.
- Enabling the use of GEM models for insurance purposes by providing customised fit-for-purpose models in a variety of vendor platforms. Sunstone, as authorised by GEM as an official partner, aims to be the key commercial company that collaborates with GEM directly in order to provide the necessary modelling solutions for commercial clients.