Insurers and reinsurers are coming to increasingly depend on catastrophe modeling technology to evaluate risks, but at least one expert thinks a lack of detailed data and improper use of such models might render their conclusions inaccurate.
“Companies really have no choice but to use these models–if not, we're back to the Stone Age,” said Tom Conway, principal of Ernst & Young's Insurance and Actuarial Advisory Services practice in Chicago. “But some inaccuracies in the models over the last couple of years have been a result of the way models were used by insurers, rather than flaws in the models themselves.”
Mr. Conway also blamed poor quality data for inaccuracies, contending this has been “documented in a lot of cases.” Data details are not always captured properly, he explained–a multilocation commercial property, for example, might only include data on the main location and not for other satellite locations.
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