14 September 2016 Insurance

Why cat models require a more proactive than reactive approach

Catastrophes in 2016, both natural and manmade, have reinforced Impact Forecasting’s view that cat models require a more proactive than reactive approach, Adam Podlaha, the company’s chief executive, told Monte Carlo Today.

Podlaha noted that August’s flooding in Louisiana and earthquake in Italy went largely uninsured. “The flood is not covered by hurricane cover, but is still covered by the US government’s National Front Insurance Program scheme (NFIP),” Podlaha said. He said the models need to be developed so that they can help the industry better cover risks such as these.

“The first thing we will do is use risk models to help insurers and reinsurers quantify the possible losses. We’ll create a footprint for the event and we’ll give people an estimation of what the losses could be—that is more reactive. We are also working proactively.”

Podlaha said that for largely uninsured communities Impact Forecasting is trying to engage with private insurers to create new flood products.

“We want to provide tools to make it insurable,” he said.

Podlaha said Impact Forecasting has different ways of quantifying terrorism risk, and uses Lloyd’s realistic disaster scenarios.

Impact Forecasting has built 3D models of the buildings for the whole of Manhattan and the whole of London, for example, which it can use to get a better handle on this risk.

It takes into consideration the structure and number of storeys of the buildings and all the different possible outcomes of where an explosion is placed, Podlaha said.

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