The Genesis of Storm Clustering: What Impact on Reinsurance Treaties Hours Clause?

The Genesis of Storm Clustering: What Impact on Reinsurance Treaties Hours Clause?


Thanks! Share it with your friends!


You disliked this video. Thanks for the feedback!

Sorry, only registred users can create playlists.


With an annual European average market loss of roughly €4.4 billion, extratropical cyclones constitute one of the major risks insurers face, especially when these storms come in succession. “Storm clustering” happens when two or more storms occur within a short timeframe: it characterizes the dependence between several closely-timed storms. In meteorological terms, a storm is the encounter of a low pressure system with a single jet-stream, whereas in the case of storm clustering, the clustered storms are seen as the encounter of several low pressure systems with a single jet-stream.

This phenomenon, illustrated by the infamous Lothar and Martin storms of 1999 (as-if market loss: €13 billion), plays a major role in reinsurance. Indeed, in order to take the dependence between storms into account, the "hours clause" in reinsurance treaties allows the aggregation of events occurring in a given timeframe (e.g. 72 hours). All attained losses are thus considered as losses from a single event.

In order to better apprehend storm clustering, we first defined a set of axioms by questioning the market’s clustering hypotheses (i.e. brokers, reinsurers, modelling agencies). We then used 200 years of simulated climatic data from Météo-France in order to test each of these axioms. Finally, we derived a proper paradigm for storm clustering, and we built a scoring methodology based on this paradigm for storm models.

We also investigated the genesis of storm clustering by studying the link between the subtropical jet-stream, low pressure systems and storms affecting France. The preliminary results show that the subtropical jet-stream responsible for extratropical cyclones over Western Europe is often stable over a period of a week or even longer. Moreover, evidence supports the idea that this jet-stream is the main cause behind Western European Storms. As such, we believe that the 72 hours clause is underestimated and should be re-evaluated in the light of these facts.       

Post your comment

Sign in or sign up to post comments.
Be the first to comment