The reinsurance industry uses NCEI data to offer traditional insurance providers a layer of financial protection against the possibility of major losses due to catastrophic weather or climate events. Because extreme weather incidents can cause billions of dollars in losses, property insurers seek reinsurance coverage. After large-scale events such as Hurricane Katrina, insurance companies use reinsurance to pay out losses. Reinsurers use NCEI data to gauge risk on a larger scale, as expensive weather disasters can and do happen across the entire United States.
Reinsurance companies apply NCEI data to catastrophe (CAT) models that simulate specific risks associated with natural and man-made disasters. Our tropical cyclone and track data from satellites or storm data from radar stations are used to run CAT models that help set pricing for reinsurance policies.
These models also help insurers confirm that a natural disaster has occurred, which allows them to validate claims. The ultimate positive outcome is a quick response for communities, industries, and individuals.
Review the Success Stories on User Engagement report from December 2016 for more detailed information about NCEI data applications in the reinsurance sector. The report compiles feedback from insurance and reinsurance representatives, reinsurance brokerage firms, CAT model developers, and NOAA.
Many NCEI data products add real-world value to the insurance/reinsurance sector. In the report, industry officials note several useful tools from NCEI, including Next Generation Radar Data (NEXRAD), which provides data on a variety of weather events, and the International Best Track Archive for Climate Stewardship (IBTrACS), which compiles data on tropical cyclone tracks around the world.