Catastrophe Modeling Software Has Evolved In The Age Of Terrorism

Catastrophic loss has always been a source of major concern for insurers. The premium charged for a risk and the aggregation of risks that an insurer might assume take on greater significance when many policies could incur loss from a single event. As insurers have grown larger, the issue of correlation of risk between individual policies has become increasingly important.

The first tools developed to monitor the problem of correlation involved putting pins representing exposure into maps. Although this process was labor and space intensive, it worked well for tracking fire accumulations. With the addition of new perils that affected more widespread areas than fire, it became outdated.

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