2017 nat cats show value of objective event data
Recent nat cat events illustrate the value of post-event data collection and aggregation, Luzi Hitz, of PERILS, told Baden-Baden Today.
The PERILS database is used by modelling companies to obtain actual, objective event data, which can then be used to improve their models and make them more effective. Its data are also used as triggers for risk transfer products that are triggered by market loss. In both cases, PERILS’s value is as a neutral and reliable independent reporting agency.
“Recent events nicely illustrate the value of our work because the range of loss numbers which you hear are obviously extreme, especially for Maria. It shows that models are useful and needed, but they can still be improved,” said Hitz.
“If you want to improve a model what you really need is actual real data—because then you can start to do a reliable calibration of the model. This is ongoing work; the recent events and the entire modelling outputs and projections of these events illustrate that the work is not done yet.
“It continues and that’s why the work we perform—data collection, post-event—is so valuable because it helps the modellers to improve the models and make them more reliable.”
Regarding current speculation on the nat cat events’ impact on rates, Hitz’s view is that the industry will not see rate increases across the board.
“It’s a situation similar to that after Katrina, Rita and Wilma (KLW) in 2005: rates will definitely go up in the areas which were loss-affected. The mature markets will probably stabilise but in emerging markets, it will be a tough sell to increase rates.
“This is what was observed in the time after KLW. Even though it’s all one capital base, reinsurance lives through global diversification, so you would have a good rational argument to say this $100 billion loss needs to be carried by everyone—but market forces often do not tend towards this rational response.”
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