Catastrophe risk modeling firm AIR Worldwide collaborated with the Association of British Insurers and other industry experts on a detailed paper outlining the challenges of non-modeled catastrophe risks and proposing methods to assist in their quantification.

Click here to view the entire report.

“This paper aims to support companies in improving the explicit identification and modeling of catastrophe risks within their risk management and capital modelling frameworks,” said Tristan Garnons-Williams, Policy Adviser at the Association of British Insurers. “Alongside a number of contributions from various industry representatives, AIR’s input was highly valuable in compiling the report.

“AIR provided a respected perspective on how to think about and manage perils that are not yet modeled.”

For the purposes of this paper, non-modeled risk is defined as any potential source of non-life insurance loss that may arise as a result of catastrophe events, but which is not explicitly covered by a company’s use of existing catastrophe models. Sources of non-modeled risk covered in the paper were divided into four categories:

• Regions and perils not covered by catastrophe models;
• Secondary perils and effects not covered by catastrophe models;
• Classes and lines of business not covered by catastrophe models;
• Coverages not considered by catastrophe models.

Sources: AIR Worldwide, Association of British Insurers