This week IUA held its second successful catastrophe modelling seminar once again jointly with the Reinsurance Association of America (RAA). Building on last year’s inaugural conference, we were pleased to attract close to 100 delegates from 35 different carriers and 12 countries. This clearly shows the international nature of our business and the growing importance of modelling for catastrophe business both pre and post event.
We focussed this year on practical issues relating to the use of models, the relationship between climate change science and current flood models and much more attention on earthquake hazards. The role of the capital markets was also discussed along with the need for greater standardisation of exposure data (see earlier blogs).
Many speakers stressed that catastrophe models are merely a tool which need to be understood both in terms of their strengths and weaknesses. There should not be an over-dependence on these models indeed they can differ between vendors. The models also need to be continually updated because a reliance on a model which is a few years old may cause inaccurate capital allocation and corporate risk management.
There was a deliberate greater emphasis on earthquake modelling this year. This was particularly appropriate given the recent Chinese earthquake. Many interesting statistics were delivered by speakers from Swiss Re and Doctor Ross Stein of the US Geological Survey. Dr Stein explained a new initiative which is to build an independent standard to calculate and communicate earthquake risk thereby raising risk awareness and promoting mitigation and insurance use. He said that many homeowners and businesses are not aware of their earthquake risk, however remote, and this new standard would enable anyone to identify their risk profile. Perhaps not surprisingly Tokyo was identified as having the greatest earthquake risk and whilst many earthquake prone areas eg. in Asia are not necessarily well insured, there is no doubt that the insured interest within Tokyo, much of which is written within London, is substantial.
IUA has moved away from generic market conferences and now concentrates on specifically targeted themes which have a direct benefit to members' underwriting and claims business. We look forward to repeating our catastrophe modelling seminar next year. It is of course too early to tell whether next year’s event will be reflecting on an active 2008 US hurricane season.
