Page 27 - Insurance Times August 2019

'Expect The Unexpected' is the lesson to be learned from Y State Regulators promote use of Cat Models for Insurers
available Cat Models. Cat Models are means to an end but to charge correct levels of rating to catastrophe prime
not end in themselves. areas insureds covering AOG Perils in Property Risks as
well as CAR/EAR Risks and Motor Own Damage
Life Cycles of the process of actual Cat Events are to be Coverage.
understood in details of exposures location-wise and
Y Rating agencies like S&P, AM Best use Cat Models to
number of past loss events. assess financial strength of Insurers and Reinsurers to
analyze their premium rates and overall Returns on
In fact, actual loss events behind the Cat Models are to be Capital cash.
lessons for real modelling efforts. This is a continuous
process to be followed. Y Reinsurance brokers and Reinsurers use Cat Models in
structuring Reinsurance Programs for Insurers with

However, in Western World of USA/Canada, Western sufficient range to cover full exposure and also fix prices
Europe, Australia, New Zealand and Japan, Cat Modelling for protection especially on Cat XL Treaties.
Processes are revised realistically. Y European Unions Insurers use Cat Models to satisfy
requirements to maintain capital base under solvency
But other Afro-Asian and Latin American Markets have to II. These are internal Cat Models developed by each
follow Risk Management techniques by CRESTA Zonal Insurer.
Assessments and Cat Modelling.
Y In the Alternative Reinsurance Technology of
Securitization of Risks through Cat Bonds, the capital
All these facts reveal basic facts to appreciate practical use market Cat bond investors and Investment banks use
of Cat Models: Cat bonds for pricing and structuring Trigger Point of
Y Cat models have variable forms according to exposures Earthquakes' magnitude.
of risks in countries as markets of Insurance and
Y Insurance industry is working with ACORD-Association
Reinsurance.
for Co-operative Operations Research and Development
Y All models cannot be equal. for sharing exposure data made available through Cat-
Y Without a model, underwriters have to grope in the Models.
dark.
Y International Society of Catastrophe Managers (ISCM)
Y Cat models are used on guidelines to realistically also promotes professionalism within Insurance
understand exposures of risks underwritten by each Industry through Cat-Modelling processes.
Insurer in the same market.
Y Cat-Models are probabilistic models to assess Loss
Y Cat models provide a historical link to current Patterns on set of events such as what happens when
exposures of risks. Category IV windstorm occurs, what happens when
Y Modelled and Non-Modelled Nat-Cat Risks are to be
combined to arrange Reinsurance Protections of each
Insurers' portfolio of class-wise risks in General
Insurances.
Y Cat Models are a continuous process to give the
Insurance and Reinsurance Industries more confidence
to grow with strength, stability and adequate
Reinsurance Protection.

CAT models are used by:
Y Risk Management Team of Insurers use a Cat Model to
assess their Nat-Cat Exposures and monitor their own
portfolios' overall exposures to specific AOG Perils of
their own domestic market. This helps them to decide
necessary Reinsurance Protection.

The Insurance Times, August 2019 27