Casualty Catastrophe Analytics: Where We Are Now and Where We Should Be on This Critical Risk
By Stephen P. D'Arcy
Despite the occurrence of numerous casualty catastrophes that have had a significant impact on the insurance industry, the state of casualty catastrophe modeling lags far behind that of property catastrophes. One reason for this lag is that casualty catastrophes develop slowly, as opposed to property catastrophes that occur suddenly, so that the impact, both financial and psychological, has less of a shock element. Other reasons include the dearth of data and the relative complexity. This paper reviews the history, assesses the current state of models, and suggests steps to improve the industry’s analytics of casualty catastrophes.
Keywords: Casualty catastrophes, catastrophe models, risk-based capital, realistic disaster scenarios, gamma distribution