Insurers and reinsurers will for the first time be able to model the behavior of building fires similar to how they model hurricanes using a new system developed by Risk Management Solutions (RMS).
The new model, called RMS Account Fire Model, is meant for primary commercial and specialty insurers and reinsurers, RMS said.
Craig Van Anne, RMS vice president, said the model allows insurers to analyze not just the extent of loss when a fire occurs but also the probability that a loss will occur. "We're coming up with not only assessments of potential fire loss but also probabilities of experiencing a certain level of loss," Mr. Van Anne said.
The model will also allow account underwriters to better assess risks by simulating the behavior of fire as it spreads throughout a building, RMS explained.
It simulates the mitigation effects of sprinkler systems and the impact of fire department activity based on response and control times from actual U.S. fire incident statistics, the company said. The model then provides an engineering assessment of the vulnerability of buildings, contents and business interruption to fire.
"It is the first dynamic risk model that provides account underwriting risk metrics that are consistent with those used for managing insurance portfolio exposures," RMS said.
Mr. Van Anne commented in a statement: "Traditionally, fire risk underwriting has been based on limited exposure data and subjective analysis. By having comprehensive data on the properties within an account, underwriters can be more confident about assessing the profitability of the business they take on."
Mr. Van Anne also said that, currently, if an insurer has an account with 100 locations, generally the insurer's engineers may only get out and look at the top five locations. The model, he added, would allow the insurer to analyze the fire risk across all locations of the account and view hazard profiles by occupancy and construction type.
The model replicates what a typical location looks like based on the parameters entered, he said.
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