Geocoding

Geocoding turns a postal address into latitude and longitude, and assigns each insured risk a position on the map. The operation seems trivial; yet it conditions all management of natural perils and accumulations. A catastrophe model computes the hazard, flood depth, wind speed, earthquake intensity, at the exact point where the property is: a position off by a few hundred meters can place a building outside a flood zone it actually occupies, or the reverse. Geocoding precision varies: to the street number, the street, the postal code or the municipality, and a large share of portfolios is geocoded only at the coarsest level, particularly commercial risks with multiple addresses and data received from cedents. Reinsurers and rating agencies therefore scrutinize exposure data quality, and penalize poorly located portfolios with safety loadings. For the actuary and underwriter, improving geocoding is often the most cost-effective way to reduce uncertainty about accumulation, even before refining the models themselves.