Dr. Erwann Michel-Kerjan, executive director of the Wharton RiskCenter, Philadelphia, and Dr. Juliet Biggs, professor at theUniversity of Bristol, England, , received the 2014 Lloyd’s Science of Risk Prize inLondon last week.

The award recognizes Michel-Kerjan’s work on Evaluating Flood Resilience Strategies for CoastalMegacities, published this year in Science, whichwas jointly undertaken with Jeroen Aerts, Wouter Botzen, Hans deMoel (VU University, Amsterdam), Kerry Emanuel (MIT) and Ning Lin(Princeton University).

Each year, the Lloyd’s Science of Risk prize is awarded toesteemed academics and Ph.D. candidates who, through theirscientific work, further the understanding of risk and insurance.In its fifth year, the prize is offered in two broad categories:climate change and natural hazards.

“The research submitted gave us valuable insights into new andemerging risks and how to assess them, which is the essence of ourScience of Risk prize,” says Lloyd’s director of performancemanagement, Tom Bolt, who presented the awards.

Michel-Kerjan and his colleagues, who took home the top honor inthe climate change category, performed a full cost-benefit analysisof resilience strategies to protect large coastal megacitiesagainst storm surge, today and in the future, and applied theirmethodology to New York City.

Considering the impact of Superstorm Sandy on New York City,Michel-Kerjan and his colleagues proposed four resiliencestrategies to cope with future storm surges and the likely impactof sea level rises. Similarly, the difficulty in financing suchresilience strategies involving large-scale infrastructureprojects, including barrier islands, was considered by thepaper.

One solution was to issue a multi-year “Resiliency Bond” tospread out the upfront cost over time, while another was to imposea “Resiliency Fee” on visiting tourists.

"As we discussed in the Science paper, it cantake 10 or 15 years (from design to construction) to build thenecessary protective infrastructure. This is why several of thestrategies we evaluated for New York City, which will becost-effective under future climate, should be started now,” saysMichel-Kerjan.

"If one waits for another $70 billion loss to act, we would havelost time and money," he added. "Similar discussion should occur inthe U.K. and actions be taken." iscussed inthe Science paper, it can take 10 or 15 years(from design to construction) to build the necessary protectiveinfrastructure. This is why several of the strategies we evaluatedfor New York City, which will be cost-effective under futureclimate, should be started now,” says Michel-Kerjan.

Michel-Kerjan asserts that the insurance industry should play akey role in building stronger communities that are able towithstand natural disasters.

"When insurance is risk-based it can provide a powerful signalof the level of exposure those at risk actually face," heexplained. "It can also reward good behavior: if a family or abusiness invests in risk reducing measures the cost of insurance islower."

"The challenge though is that for political reasons, floodinsurance is rarely risk-based," he added. "This is a big challengein many countries around the world."

The jury recognized the innovative and multidisciplinaryapproach of the team, as well as the research’s applicability tobuilding resilience and measuring return on investment, which couldbe deployed globally.

Dr. Juliet Biggs: Natural Hazards prize

Winning submissions incorporated research papers from a diverserange of fields and sources, employing satellite data, catastrophemodeling, engineering innovation and economic analysis. Dr. JulietBiggs, professor of Earth Sciences at the University of Bristol,and her team received the award in the natural hazards category,for their work, “Global link between deformation and volcaniceruption quantified by satellite imagery.”

"The idea is that as magma moves beneath a volcano it mightcause the ground to uplift or subside by a few centimeters, or evenmeters. It’s as if there was a balloon of magma inflating anddeflating underneath the volcano. The small displacements can bemeasured from satellite observations," says Biggs.

The use of satellite imagery has been around for decades, butBigg’s research marks the first time volcanoes have been monitoredon a global scale.

“Lloyd’s welcomes this innovative use of satellite data toprovide early warning information to investigate risk around theworld," says Lloyd's head of exposure management and reinsurance,Trevor Maynard.

While the research was taking place, 34 volcanoes were eruptingaround the world, including Bardarbunga in Iceland, and Hawaii’sKilauea.

"We've used a large archive to satellite data to lookprobabilistically at the link between displacement and eruption sowe can put a number on the proportion of volcanoes that havedeformed or have had an eruption," Biggs explains, "so we can startto turn these things into probabilistic hazard analyses, just likeyou might do with a meta-analysis of medical trial data."

The recent launch of Sentinel-1 by the European Space Agency isset to boost the monitoring of volcanoes yet further. Sentinel 1A,which was launched in April, provides all-weather, day and nightradar imaging for land and ocean services.

"We're currently building a processing system which should allowus to analyze displacement data from all the world's volcanoes andpost them freely available online in near real time," Biggs says."That's our medium-term goal. We hope to make this informationavailable to the general public, volcano observatories that areresponsible for the threat levels of individual volcanoes and alsoto the insurance industry."

Biggs says that she hopes the Science of Risk prize will openthe dialogue between scientists and the insurance industry.

“It might be particularly useful for the insurance industrybecause by looking at a large dataset, we can use probabilistictools. We now have statistics that can be applied to volcanoes thathave little ground-based observation infrastructure,” she says."I'm very excited about winning this because it gives me theopportunity to interact more closely with the insurance industry tounderstand how they work and how this research might be useful forthem.”

Upon the announcement of this year’s winners, Dougal Goodman,chair of the prize committee, praised Lloyd’s for their efforts toraise awareness, as well as broadening the scope of knowledge andresearch associated with climate change and natural hazards, andfurthermore, promoting its value to the reinsurance market.

“It’s fair to say that the papers looked at how to lightenthe suffering and improve the resilience of communities rightacross the world,” Goodman says.