Time to broaden your catastrophe risk landscape thinking
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EventsMonte Carlo 2023

Time to broaden your catastrophe risk landscape thinking

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Hurricane Ian flooded houses in Florida residential area. Natural disaster and its consequences

By Robert Muir-Wood, Chief Research Officer, Moody’s RMS

There can be a tendency among risk management professionals to apply a ‘recency bias’ when analysing catastrophes and to be over-influenced by the actual events of the past 10 or 20 years, their locations, impacts and consequences.

But we know through stochastic modelling that each actual event is just one sample from a wide range of possibilities, which may be equally likely. Contemplating whether some recent catastrophe could have been more, or less, impactful through small variations in its trace, source or severity is useful thinking and helpful for avoiding the belief that any actual event is somehow ‘iconic’, to be employed for special portfolio analysis or used as a key benchmark.

How can you broaden your thinking about the catastrophe risk landscape? Away from the typical primary-peril hotspots which represent a well trodden ground for catastrophe modelers, such as Florida hurricanes or California earthquakes, we have recently seen many ‘surprising’ mid-size cat events from ‘secondary’ perils such as wildfire, severe convective storms, flood and winter storm.

Why do this? Selecting new potential catastrophic scenarios, or even adjusting the parameters of events that have happened, can help to highlight catastrophe potential and how an event could impact portfolios.

To encourage an appropriately balanced perspective on catastrophe risk, Moody’s RMS has selected a set of six ‘less familiar’ potential catastrophes, without recent examples, that could each bring significant losses to the (re)insurance market. Each is intended, realistically, to highlight catastrophe potential.

From a New England hurricane, Europe flood and convective storms, and flooding in major industrial parks across Southeast Asia, visit www.rms.com/blog to find out more about new catastrophe scenarios with significant loss potential.


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