Milan Simic says complex software and data are issues with current natcat models
14 Jul 2016
The Executive Vice President of AIR, co-presented “Modelling portfolios versus single risks - are cat models focused enough?" together with Yörn Tatge at the Catastrophe Knowledge Exchange event at the Swiss Re Centre for Global Dialogue.
Click here to find out more about the event.
During the session with Milan Simic and Yörn Tatge, the group discussed the suitability for risk analysis of windstorm, earthquake, flood and man-made risks and how a more focused value distribution can prevent the over- or under-estimation of losses depending on the location.
View their presentation slides here
Read the text version of Milan Simic’s video interview below:
“The insurance industry has, over the 30 years, become incredibly resilient. We simply do not see companies failing, whether they are insurance or reinsurance companies, failing as a result of natural catastrophes - and we have seen a similar situation in Katrina. I firmly believe that the insurance and reinsurance industry has all the tools at its disposal to weather another storm.
Well, what we find challenging about the existing natcat models is their complexity. That complexity manifests itself in two ways. One is the complexity in the abundance of data, and the other one is complexity of the software products. We as both software and a model provider find that increasing all the time. Over our history of nearly 30 years, we have seen both increase tremendously over the period.
The natcat models can be improved with more events and more data points. It's something that every part of science and engineering needs, is more data and more points. In other words, we need more events, more information on claims information. Also, we need more sharing of information, whether that's to do with exposure, hazard or vulnerability.
From the risks where we have data and models, you could say that practically every part of the world and every peril is under-insured. There is something that is known as the protection gap. That protection gap exists in practically every part of the world and for every peril. It exists in the U.S., most notably for flood and earthquake risks, but is also prevalent in Asia and practically every country where the protection gap percentage-wise is particularly large."
Click below to read the themes from the first Catastrophe Knowledge Exchange:
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