Insurers Study Aggregate Risk
The record 2004 hurricane season has led to a much greater focus on aggregate risk that will prompt changes in catastrophe risk assessment, an industry executive told a recent gathering of actuaries.
Randall Brubaker, senior vice president of Chicago-based Aon Corp., speaking during the Casualty Actuarial Society's recent spring meeting in Phoenix, said that companies buying reinsurance today are much more interested in aggregate probable maximum losses (PMLs) than they were in the past.
In a statement, Mr. Brubaker said that the four hurricanes that hit Florida in 2004 have created a demand for information that takes into account a full array of data instead of focusing on one individual occurrence. He said there will be greater focus on the quality and completeness of exposure data for catastrophe models in the months to come.
As for the impact on the reinsurance market, Mr. Brubaker said that the 2004 season has not driven up reinsurance pricing, although the changes in the catastrophe models might affect reinsure pricing models in the future.
While information on 2004 losses is still being gathered and analyzed, he anticipated there would be a number of changes to catastrophe models this year and in 2006.
Thomas Hettinger, managing director, EMB America, LLC, a consulting service and subsidiary of U.K.-based EMB, noted that the reinsurance market post-2004 has reacted differently from post-Hurricane Andrew in 1992 by not hardening. He attributed the result to more sophisticated catastrophe modeling techniques. He stressed that insurers need to make greater use of modeling in the future.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.