Bill McGuire reviews the first year of the postgraduate course in Natural Hazards for Insurers.
In a world experiencing ever more erratic weather, increasing urbanisation and mounting exposure to natural hazards, there is growing pressure on insurers and reinsurers to seek new ways of limiting exposure and reducing loss. One of the most effective ways is through developing a better understanding of the hazards themselves, the processes and mechanisms that cause them, and the means by which their impacts can be managed, mitigated or avoided.
Last year, UCL (University College London) set about improving levels of awareness of such hazards through the launch of a unique postgraduate certificate course, 'Natural Hazards for Insurers'. The course is designed specifically to provide insurers, reinsurers and others in the financial services industry with a strong grounding in the full range of natural hazards, with a particular focus on windstorms, floods and earthquakes. The primary goal of the course is to equip participants with the intellectual and practical tools required to make more informed decisions in their day-to-day encounters with natural hazard exposure and loss.
Natural Hazards for Insurers was established with the full support of the Under 35s Reinsurance Group and is the first academic course to be accredited by the Chartered Insurance Institute. The first cohort of twelve participants started in September 2002 and completed the course following presentation of their independent project results at a seminar in the Lloyd's Old Library on 3 July. Participants came from a range of backgrounds, including underwriting, broking, actuarial and technical, and represented Aon, Benfield, Catlin, Guy Carpenter, JLT, Marsh, Swiss Re and Wellington. While this initial intake was dominated by personnel from reinsurers and reinsurance brokers, we hope to see a greater interest from the insurance sector in future years.
Flexible and accessible
Considerable effort has been made to ensure that the course is both accessible and flexible, establishing it as a viable option for full-time career professionals. It can be taken over one or two years, and classes are timetabled to minimise out-of-office time and to avoid the year-end renewal season. The two taught modules - in Geological & Geotechnical Hazards and Meteorological Hazards - are taught in eight week blocks starting in September and January, while the third - Independent Project - module is undertaken in the participants own time and needs to be completed by the end of June. Examination of the taught modules is by seen written paper, while the project is assessed through a written report and an oral presentation of the results at a presentation day in the Lloyd's Old Library. This event is advertised and open to anyone who wishes to attend. This year, over 50 people came to listen to the talks.
Unlike many postgraduate courses, Natural Hazards for Insurers is taught by a mix of expert tutors from academia, the financial sector and industry. The course is staffed by UCL academics from the Benfield Hazard Research Centre and other departments. These are ably supported by academics from other institutions with hazard research expertise, including Cambridge University, the University of East Anglia and Imperial College London, and industry and insurance market practitioners from WS Atkins, Ove Arup, RMS, and others.
In terms of the teaching approach, strong emphasis is placed on developing an improved understanding of natural hazards - the nature of available data, the conclusions we can draw from them, limitations, and relevant up-to-the-minute research. The Geological & Geotechnical Hazards module begins with a brief but comprehensive introduction to the Earth and how it works, before concentrating on seismic hazard and risk. Causes of earthquakes and earthquake monitoring are examined to set the scene for detailed coverage of seismic hazards, building performance during quakes, anti-seismic design, seismic zoning, and earthquake monitoring and forecasting. In addition, specific attention is paid to the important issues of building vulnerability, critical installations, earthquake bonds, quake cat models, and probability and determinism in seismic hazard and risk assessment. The balance of the module addresses the remaining geological hazards - volcanic activity and landslides - and also focuses on geotechnical issues such as groundwater hazards, contaminated land, dam and reservoir safety, and subsidence.
The Meteorological Hazards module follows a similar pattern, beginning by introducing the participants to the Earth's atmosphere and hydrosphere, the principal characteristics and importance of climate variability and change, and the quantification of meteorological hazards. Detailed treatment follows of tropical cyclones, European windstorms and tornadoes, and river and coastal flood, with the balance made up by discussion of wildfires, lightning and hail. Specific topics of particular interest to the insurance market include modeling hurricane and European windstorm loss and European flood loss, weather risk management and weather derivatives.
Spoilt for choice
The Independent Project module is a key element of the course and provides the participant with the freedom and opportunity to focus on a topic that particularly attracts their interest. Typically, this also addresses a problem or theme that is of concern to the company for which they work, but this is not an essential requirement. The choice of topics made by participants this year is extremely wide and includes: assessment of the seasonality of major earthquakes in Japan, implementation and application of catastrophe modelling in the insurance industry, wind hazard from US hurricanes, the effect of ENSO (El Niño - Southern Oscillation) on Atlantic hurricane frequency, and analysis of methodologies used to derive functional windspeed datasets for use by the insurance industry.
Studying for an advanced qualification while maintaining a professional career is always difficult, and although the course requires just 16 afternoons away from the workplace in total, coursework and the project do require some commitment during evenings and at weekends. Nevertheless, this year's participants coped extremely well and expressed considerable enthusiasm for the course and its goals.
One of the students on this year's course, Carl Holden who works for reinsurance intermediary Benfield said of his experience: "I found the course really beneficial to me. It was great to be taught by highly experienced academics in the field as well as key people in the catastrophe modeling industry and other natural hazard-focused agencies. Also it was a great opportunity to meet other students who were working in a common environment, outside of the normal competitive industry circles. Most importantly, it gave me a chance to extend my knowledge of earthquakes, seismic risk and seismic hazards, and this was particularly relevant since I was helping to build an earthquake model at work at the time. The course was intense and it was often a real challenge to complete all of my studies while doing a busy day job. However, I enjoyed being given the opportunity to step out of the corporate environment once a week and to look at things from an academic perspective."
Looking back we are extremely pleased with the way the first year of the course has gone. Any new course can be expected to have a few hiccups during its first year, but generally things have gone very smoothly and we have been particularly impressed by the quality of the participants and by their continued enthusiasm for serious academic study while maintaining a full time career.
Later this year we will be starting the UK's first Masters programme in Geophysical Hazards at UCL, some of the modules of which will be taught in common with those making up Natural Hazards for Insurers. There has been a considerable interest from insurance institutions in Canada and other countries for a 'portable' version of the course, potentially opening up a large global market. We are now taking applications for this year's course which is due to start on 9 September.
By Bill McGuire
Professor Bill McGuire is the Course Director and Director of the Benfield Hazard Research Centre at University College London.