Note: This article has been modified from the paper version of the article.

Losses from earthquakes, volcanic eruptions, hurricanes, tornadoes, and floods are increasing worldwide. For the insurance industry, it is becoming more and more important to estimate these potential losses. Every year, primary insurers are hit by billion dollar natural catastrophes, not to mention the expenses rung up by man-made accidents and terrorism. These losses can be staggering, and often it is beyond the ability of any one insurance company to pay off its claims using its own resources.

Map of historical events in Japan and extract from the catastrophe catalog for Japan.

This is where a reinsurer, or an insurer of insurers, comes in. Munich Reinsurance Company, also known as Munich Re, operates from its headquarters in Munich, Germany, serving more than 60 reinsurance subsidiaries, branches, service companies, and liaison offices worldwide. Its business partners are insurers in more than 160 countries. These insurers transfer to Munich Re parts of the risks they assume. Whenever someone is faced with the task of assessing a risk or location—no matter where in the world and including natural hazard factors—that person should know the risk potential from natural catastrophes. The result of this risk assessment may have an impact on the design and position of buildings, industrial plants, and infrastructure or influence the design of the insurance product and premium required.

Munich Re's Geo Risks Research Department has been systematically gathering information on natural hazards and catastrophes throughout the world for more than 30 years. This information includes event location, date, and duration along with short descriptions of the events. Relevant information giving a quick overview of the magnitude of the events has also been compiled. Sometimes damage to or destruction of buildings, the effects on infrastructure, damage to utilities and agriculture, and other information are noted. The effect on the population, including fatalities, injuries, and homeless and missing persons, is also listed. Finally, the economic and insured losses are recorded. This data is crucial for analyzing and determining trends in the insurance industry.

Now, Munich Re's partners can query these extensive databases of natural events and catastrophes using an intuitive mapping application called the NATural Hazards Assessment Network (NATHAN). NATHAN is the next evolution of Munich Re's well-known World Map of Natural Hazards and published World of Natural Hazards CD–ROM, the most successful publication (more than 100,000 copies) in Munich Re's history. Based on ArcIMS software, NATHAN is designed to create an efficient and easy-to-use interactive online tool to mine this comprehensive global database of natural hazards and catastrophes.

NATHAN offers users of the system many benefits. Risk managers find that NATHAN provides support for efficient decision making by allowing them to choose their inquiry criteria so they can view what interests them. Underwriters will find tailor-made information for every risk location. Since NATHAN resides on Munich Re's electronic platform for its customers, these insurance partners can find this information no matter where they are located and at any time of day. This gives them quick response times when it counts.

The NATHAN application resides on two Oracle 9.2 servers with HP-UX as the operating system. One Oracle server houses the natural hazards data and the other one the spatial information. These servers are connected to a Windows 2003 server equipped with ArcIMS, which serves mapping data through an .ASP connection to Microsoft's Internet Explorer 6.0.

NATHAN is divided into three subcomponents: a world map, country profiles, and a catastrophe catalog. Through these subcomponents, the exact spatial distribution of natural hazards and their intensities can be viewed, and specific cartographic features can be generated to fit whatever view the user needs. "At a time when natural catastrophe losses are increasing throughout the world," says Dr. Juergen Schimetschek, Munich Re, "this data represents an important resource for the insurance sector and international research institutions. Insurers around the world can access the details and trends concerning the various types of loss events."

For example, an underwriter would like to investigate the natural hazards for a semiconductor factory in Japan, approximately 30 kilometers south of Tokyo. The user logs on to ArcIMS and the NATHAN application by visiting the Munich Re Web site and providing a user name and password to the secure system. The user first locates Japan as the target area using the navigating tool in the system and zooms in. Once zoomed in to the selected area, the user receives information contained in the Country Profile, which is a country-by-country database with national statistics and gives an overview of relevant natural hazards. It also gives a statistical overview of geography, population, and economic strength of the country and the natural hazards the country is exposed to as a whole. The exposed areas are expressed as a percentage of the country's surface area. An underwriter viewing Japan, for example, would find that the country is prone to the hazards of earthquakes and tropical storms.

Data can also be identified from the catastrophe catalog layer of data (which is equivalent to Munich Re's NatCatSERVICE, the comprehensive database of natural catastrophes that have happened throughout the world over the last 25 years). The catastrophe catalog permits a rough regional estimate of the frequency and intensity of natural catastrophes on a country-by-country basis. The events can be listed by type, country, date, and extent of losses. In addition to standard inquiries, the user can also formulate interactive inquiries on events, durations, countries, and regions. If desired, the results can be printed in a report or map.

The exact spatial distribution of natural hazards and their intensities is best viewed in the World Map module. If a user locates Japan as the largest area using the navigating tool and zooms in, the various hazard themes can be selected and displayed one by one. Cities, borders, rivers, and a latitude/longitude grid can also be activated for better orientation on the map. The risk location can be pinpointed exactly using a list of more than 500,000 populated places worldwide.

The user can measure distance using NATHAN's interactive Distance function. Then, the Hazard Pointer can be applied to find all hazards within the measured distance. For example, looking at hazards 30 kilometers south of Tokyo and measuring this distance from the city to the south, the underwriter would find this location to be highly prone to earthquakes and volcanic eruptions, in addition to hailstorms and tornadoes. Tropical storms, tsunamis, and storm surges need to be considered on the coast. If more detailed explanations are needed on any of the hazards, the user only needs to activate the legend button, which will show the hazards by intensity, frequency, and reference period.

An even quicker way to find information is to use the Location List menu. This menu lists countries and cities throughout the world. Either the user can enter a search object directly, such as the name of a city, or preselect a country from a list and then click on the target desired.

The prospective underwriting approach in the insurance industry is increasingly being supplemented by a spatial or geographic component. Using geodata has helped insurers make better decisions and has given them the means to show results.

"This is exactly what geographic underwriting means—improved transparency in the insurance industry," explains Andreas Siebert, head of the Geoinformatics and Communication Department within Munich Re.

For the public, a light version of NATHAN is at www.munichre.com/nathan. For more information, contact Andreas Siebert or Dr. Juergen Schimetschek, Geo Risks Research/Environmental Management Department, Munich Re (e-mail: geo@munichre.com).