USA: Gaps in catastrophe risk modeling point to path forward

Source(s): Business Insurance

By Matthew Lerner

[...]

One key finding of the JLT Re study was that it appears that initial estimates for the catastrophe events studied, approximately 15 since 2004, were, “systematically underestimated for large, complex losses, although it remains to be seen whether this will hold for 2017,” Mr. Flandro said, adding that the discovery of a pattern was a bit surprising.

JLT Re’s study also shows, however, that vendor models have historically performed relatively well for wind events that incurred moderate losses, regardless of landfall location.

[...]

“The more basic or simple the event is meteorologically from a wind-field component, certainly the models are going to be able to generate a more refined view of loss for that,” Mr. Newbold said.

The study also found that modeled loss accuracy for hurricanes suffers when events are both costly and complex, often due to an array of unmodeled loss components such as flooding.

“The report notes poorer model performance in hurricanes with a higher proportion of water-related loss,” said Tom Sabbatelli, manager, event response at Risk Management Solutions Inc. in Hoboken, New Jersey.

[...]

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