August Coffee Talk: From Black Box to Glass Box: Evaluating Catastrophe Models to Support a View of Risk

Catastrophe models are used to make decisions across all aspects of insurance - from how much reinsurance to purchase to choosing which risks to underwrite and how much premium to charge. The foundation of these models is based on limited historical events, claims data in varying amounts and levels of granularity, and backfilled with a series of scientific and engineering assumptions to account for the possibilities that just haven’t occurred yet. We will discuss the critical steps to properly evaluate and choose a catastrophe model for a view of risk before it is adopted and implemented into a business decision-making workflow.