How well do you know your catastrophe modeling?

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The magnitude and range of the model loss estimates from recent natural catastrophes has turned the spotlight on catastrophe models, including the skill of the modeling approach and the reasonableness of underlying assumptions. More than ever before, industry stakeholders are calling on insurers to address the validity of the models they use to manage these risks. 

  • Did their models include these events beforehand? 
  • Did they accurately predict losses when the events occurred? 
  • Did different models produce different answers and how did they select the right one? 
  • Are they correctly parametrizing their models to accommodate changing climate and environmental patterns?

Achieving positive outcomes

Users can achieve a series of positive outcomes by actively pursuing a robust catastrophe model validation program, including: 

  1. An ability to write additional business rapidly in order to capture emerging opportunities, 
  2. Stability/improved categorization by ratings agencies, and 
  3. Improved estimation of catastrophe losses after major events (there by resulting in greater market confidence).

How PwC can help

Our insurance risk and capital management practice advises insurers on assessing, monitoring and managing risks from all sources. Multi-disciplinary teams provide comprehensive services in all key risk areas:

PwC’s professionals also address risk management framework components, including strategy, governance and organization, measurement and analytics, reporting, and systems and data infrastructure.

Contact us

Graham Hall

Manager, Actuarial Services, PwC US

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