Impact Forecasting, the catastrophe model development center of excellence at Aon Benfield, has launched a suite of tools to easily quantify uncertainties in catastrophe models across all perils and territories.
Devastating events, such as the Thailand flood and Japanese Tohoku earthquake in 2011, have highlighted the need for insurers and reinsurers to better evaluate the uncertainty linked with the loss estimates calculated by catastrophe models.
The new Impact Forecasting tools help quantify identified uncertainties in the hazard, location and vulnerability components of catastrophe models. The tools are integrated with ELEMENTS 8, the new version of Impact Forecasting’s loss calculation platform which also offers a new range of scenario models.
Key benefits for insurers and reinsurers include:
– Standard method of defining uncertainty for different perils and territories
– Ways to graphically visualize the size of uncertainty for per event and exceedance probability curves for different loss perspectives (from ground up, gross etc.)
– Understanding the relative importance and impact of the various uncertainties across all model components
– Enhanced ability to make informed reinsurance decisions due to an improved knowledge of uncertainty
Adam Podlaha, international head of Impact Forecasting, commented: “The entire process of catastrophe modeling comprises various uncertainties. These are inherently present in the different stages of the process – from the decisions taken during the model development phase and in the preparation of portfolio data, to the way the model is used by the analyst or in the interpretation of the results. These new tools enable insurers and reinsurers to visualize the range of uncertainties and make business decisions based on their individual risk appetites.”