Quantifying Uncertainty – A Fire Loss Example

The Issue

Property Development firm constructing a Retirement Village over a series of years in stages, needed to understand their exposures especially to a major fire event. This was to inform their insurance loss limit going forward and potential to improve the fire resiliency of the village.

TCL’s Approach to help the Client

Identified the key building accumulations at the end of a significant phase of work in the year following.
Worked with the client to develop potential reinstatement values at risk at a base level for the different configuration of units.
Used this information to inform the 8 building accumulations identified.
Undertook fire loss estimations based on typical insurance market definitions of Probable Maximum Loss (PML) scenarios.
Developed a Monte Carlo-based statistical model of the potential values at risk.
Developed a Loss Curve for the client to easily understand the potential financial consequences & probability of.

Client Outcome & Benefits

Potential future cost saving by purchasing an insurance limit based on a structured risk-based approach. No guess work.
Clearly highlighted the client’s potential risk profile in the future 2 phases of development where they could improve their designs to have better resiliency to fire risk

Client Feedback:

“A well-presented report with results and analysis that were easily understood to enable us to make decisions on insurable limits and improve the site physical fire resiliency.”