chapter  24
14 Pages

Catastrophe Modelling

Therefore, the client’s experience in catastrophes is always inadequate and, in the language of Chapter 25, has near-zero credibility. The solution to this problem is an altogether different approach to modelling – that of catastrophe modelling. Catastrophe models do not use the client’s experience – they use:

• A database of non-client-specific historical events for a country or the whole world and

• A scientific understanding of phenomena such as hurricanes and earthquakes, which allows us to produce new events, some of which may have never occurred historically to that extent to build scenarios that are then combined with the knowledge of the exposures of the client (its buildings, plants, etc.) to determine possible losses that the client may incur, and the related probabilities.