QUICK
FACTS
The weather risk group at Risk Management Solutions is using the
IMSL C Numerical Libraries to develop pricing for weather
derivatives based on variables such as temperature and precipitation.
They have added C Numerical Library subroutines to existing routines and have been
able to use them together without any compatibility issues.
THE
PROBLEM
Risk Management Solutions is the world’s largest provider of
products and services for the quantification and management of natural
hazard risks. They offer technology for the management of insurance
catastrophe risk in the property and casualty insurance industry,
and have recently expanded their services to include risk modeling
for weather derivatives.
The
company’s weather risk group delivers its solutions through
the Climetrix application, an ASP based product, which includes
pricing models for analysis of weather risk data using proprietary
algorithms. Climetrix helps transform this weather data into prices
for weather derivatives, insurance products, or other types of contracts
that can be used to hedge weather risk.
The
weather data and pricing analysis created by Climetrix is important
to many different types of companies. Any company whose business
success is impacted by the weather may turn to RMS for help.
For
example, energy companies often generate too much or too little
energy depending on the weather or season. When they are interested
in buying or selling the energy they have or need, they turn to
the weather risk group at RMS for price analysis. Other examples
include agricultural trade entities, ski equipment companies interested
in buying insurance based on how much snowfall will occur in the
winter months, or concert stadiums buying insurance for possible
losses sustained due to rain during a performance.
The
developers of Climetrix were interested in expanding their product’s
ability to provide the most reliable and timely analysis of weather
data to create pricing models. In particular, they were
interested in efficient and proven multi-threading capability for
optimizing their results. Until the implementation of the IMSL C
Library, the group
built and maintained all of its own algorithms, but realized that
a lot of time was spent on these efforts. In addition, some of the
older 
optimization
algorithms were not as efficient as they could be, and the group
was looking for improved multi-threading capabilities. They wanted
a stable and reliable solution that would easily integrate into
their existing systems, and algorithms that were fully tested so
they would not need to exclusively develop, maintain and document
their own set of routines.
THE SOLUTION
Ultimately, the Director of Product Development
for Climetrix, Anju Gupta, turned to the IMSL C Library from
Visual Numerics, Inc. to solve her problem. Due to the company’s
long history in mathematical and statistical analysis, Gupta was
confident that they could trust the IMSL C Library algorithms to enhance their
application.
RETURN
ON INVESTMENT
Currently, Gupta and her team at RMS have begun to use and replace
some of their algorithms with the IMSL C Library routines. The new techniques
and algorithms available in the libraries are expected to improve
and advance the success of the Climetrix product, and they welcome
the reliability, stability, and compatibility it provides.
They will continue to implement and test
the algorithms and expect to see increased savings in time and money
as they move forward. Gupta explained that they are thinking about
sharing the technology with other groups within RMS, "Other
groups that work on catastrophe risk, earthquakes and floods could
see the same improvements and benefits that we have experienced
with the IMSL C Library."
