S&P highlights modelling uncertainty
Thursday, 05 05 2016, Category: Insurance and Reinsurance, Country: World
Ratings agency Standard & Poor’s (S&P) has discussed the uncertainty with catastrophe risk modelling and the impact this can have on insurance and reinsurance ratings, underlining the need for companies to take any uncertainties into account.
“Catastrophe modeling is a complex process that is influenced by numerous estimates, assumptions, and subjective judgments.
“We consider that there is a significant modeling uncertainty when estimating cat exposure–that is, the difference between the potential range of losses under extreme events (consistent with a 1-in-250-year loss) and the losses estimated using the catastrophe models at this confidence level,” explains S&P.