Report of the Catastrophe Modelling Working Party

Document description

The first part of the paper gives a brief introduction to catastrophe modelling. We then discuss the uses that actuaries make of catastrophe models in their work.

•The subsequent sections of the paper then address in detail various aspects of the models and their inherent limitations.

•We have structured this main body of the paper to follow the usual course of any actuarial loss investigation, beginning with the data available, and moving on to consider frequency and severity. We then discuss the design of the models, and the mathematical approximations in them before finally considering those aspects of natural catastrophe losses that are not captured by the models at all.

•Catastrophe modelling is a huge subject and this paper only gives an outline of some of the key considerations actuaries should make in using the models. For those who want to investigate further we provide, at the end of the paper, a comprehensive list of references and links to further reading. We also provide a Glossary of useful terms and a summary of some key Atlantic hurricane data by year.