A change to a catastrophe model, like the latest revision announced by Risk Management Solutions, can influence the level of reinsurance purchased by companies and impinge on the rating process.
"If a company relies on only one model, it could have a big impact on its balance-sheet strength," said Thomas Mount, assistant vice president at rating agency A.M. Best Co.
Assuming a company buys reinsurance up to the minimum required for a 1-in-100-year wind event, and it used only one model whose results changed greatly after revisions, a company's overall financial strength may suffer, he said.
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