DyGIST: Flexible HD event selection to enable timely response - a U.K. coastal surge example

Author: Edwina Lister, Director - Risk Management, Moody's

As the U.K. Prudential Regulation Authority (PRA) Dynamic General Insurance Stress Test (DyGIST) exercise approaches in early May, we want to give our clients who need to participate in the test visibility into how we are updating our processes so we can deliver timely, credible event selections for our high-definition (HD) models based on the information provided by the PRA. 

This blog will focus on U.K. coastal surge risk, which is one of the HD-modeled perils that could be part of the DyGIST exercise.

A new tool for a new challenge

Moody’s has developed a new HD coastal surge selection framework—a structured, data-driven framework, designed to rapidly identify representative coastal surge events from our stochastic catalogue based on a range of inputs.

The approach has been validated against historical hazard observations, including those from major historical storms.

By testing the framework against this observed hazard data, we have demonstrated that it produces defensible, realistic event sets whose loss outputs align closely to observed impacts—giving our clients and us confidence in the robustness of the selections.

Flexible enough to work with whatever information we have

One of the HD coastal surge selection framework's most important features is its flexibility.

For live real-world events, we draw on real-time data sources to anchor our event selection directly to the observed on-the-ground flooding—matching the geographic extent and severity of what has actually occurred.

For DyGIST, the situation is different. The PRA will be presenting constructed scenarios rather than real events, and we do not yet know how much detail they will provide. Our framework is designed to accommodate this uncertainty—we can work from a range of inputs to construct event(s) with whatever information the PRA makes available.

Why this matters

The PRA will expect credible, explainable event representations. Moody's can now respond rapidly to whatever coastal scenario the PRA could announce, with a defensible methodology behind every event ID we deliver.

We will have the equivalent process for Moody’s RMS U.K. Flood and Windstorm HD models, ensuring the same structured, timely approach applies across perils—however the exercise unfolds.  This will enable us to respond to our clients promptly with a robust event selection for the DyGIST in May.

As always, when we deliver an event ID, we will accompany it with clear commentary and any additional considerations for your submissions. More details on our full DyGIST event response process will follow.

In the meantime, please reach out to your Moody’s account representative with any questions.