Non modelled loss and cat modelling

Typically, the insurance industry will take a conservative approach when allocating capital for ‘unquantifiable’ risks. Finding appropriate methods to model risks can reduce the capital burden and make firms more competitive

Andrew Mitchell, Matthew Eagle and Brian Owens

The natural catastrophes of 2011 will be remembered for many reasons, not least for the unprecedentedly high insured losses they caused to the insurance and re­insurance industry. Unusually, much of this loss came from outside the US and Europe – across the globe, there were large losses reported in Australia, New Zealand, Japan and Thailand. From a catastrophe-modelling perspective, 2011 will be remembered as much for what was not modelled as for what was.