Loss estimates for hurricane Laura are diverse and vague. Steve Smith, director, insurance product and modelling for QOMPLX, says he knows why – and what to do about it.
The loss estimates for hurricane Laura reveal a problem for the re/insurance industry: they are so wildly diverse that it’s easy to start questioning their value. Not only is there huge disparity between different modelling companies’ estimates – with AIR coming in a $4-8 billion, for example, while RMS sets the losses at $9-$13 billion; the estimates also often cover such a wide range that you could fit another hurricane’s worth of losses within the given range.
Dr Steve Smith, director, insurance product and modelling at QOMPLX says his team have investigated the problem, identifying the causes and several solutions.
“The problem comes down how the models are built, the paucity of data that goes into them and the uncertainty around the characteristics of the loss,” he says. “While the characteristics of the event are well understood - we have a very solid data set within a few days of an event like Laura - there is uncertainty around how that hazard translates into a loss.”
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