Catastrophe Model Evaluations

Maximizing business value from your catastrophe risk modelling

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The Nasdaq ModEx multi-vendor catastrophe (cat) risk modelling platform facilitates easy evaluation of cat risk models prior to purchase. This helps you to build a stronger business case for model adoption and maximize business value.

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Background

A significant barrier for (re)insurance firms looking to add or change cat risk models has always been the difficulty associated with quantifying the benefits of doing so.

Over the past 30 years, we have seen catastrophe (cat) modelling become one of the largest budget items within the insurance and reinsurance industry. Not only are cat models traditionally costly to license, but there are also significant resource requirements associated with hosting and operating cat models. This, combined with the fact that the industry has until recently lacked a simple option for evaluating models prior to purchase, has made it prohibitively difficult for (re)insurers to build a case internally for changing or adding models. But, as the frequency and severity of natural catastrophe changes, it is more important than ever that firms have a deep understanding of their cat risk. 

A significant barrier for (re)insurance firms looking to add or change cat risk models has always been the difficulty associated with quantifying the benefits of doing so. After all, any business case to change or add models must present tangible benefits. However, since cat models, by definition, help companies cope with infrequent events with a large degree of uncertainty, assessing the incremental benefit of adding an extra model (or changing models) can take a significant amount of time and effort.

Adopting new models also requires a high level of confidence in the models prior to adoption. Part of the process of building confidence in a new model will come from understanding the model assumptions and performing model validations. Being able to easily test cat models prior to adoption is a critical step in building this confidence.

Guide

Maximizing business value from your cat risk modelling in 4 steps

  • Model evaluations

    Model evaluations or “trial periods” have the potential of improving benefit quantification since they provide firms with hands-on experience of how a new platform or model works, and the benefits they can deliver.

  • Trialling models in practice

    With ModEx, (re)insurance firms can access and trial a range of models free of charge without having to install any hardware or software.

  • Process

    The evaluation process is straightforward. After a model evaluation agreement has been completed, the evaluating firm is given access to the ModEx platform via a secure web browser for global access. The firm can then login and evaluate and compare model(s) at its own convenience for a set period of time.

  • Benefits

    Model evaluations provide firms with the tools they need to make a sound business case for new model adoption, based on more accurate cost-benefit analysis.

Have questions? Contact the ModEx team!

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