Dual approach seeks to help insurers better understand their specific Cat risk exposures: Willis Re

Willis Re is hoping to help insurers develop their own independent view of risk with the adoption of a dual approach that involves enhancing and validating output for perils and regions covered by vendor models, as well as building new proprietary models where no vendor models exist.

“In both aspects of this dual approach, the Willis Re View of Catastrophe Risk draws directly on the broader external academic resources of the Willis Research Network,” notes a statement Friday from Willis Re, the reinsurance division of Willis Group Holdings plc. Willis Re has global licenses for all of the main third-party commercial vendor catastrophe models.

The company maintains the new approach to Cat risk modelling “enables insurers to more accurately measure, mitigate and articulate their catastrophe risk exposure for all major perils and territories globally.”

Willis Re reports the need for such an approach comes as insurers are under increasing pressure from regulators and rating agencies to demonstrate a full, independent understanding and more reasoned quantification of their own catastrophe risk exposure.

“Risk quantification and risk management are high priorities within the boardrooms of insurers across the globe, and analytics plays a vital role in supporting these activities,” says Willis Re Global CEO John Cavanagh.

While Cat modelling is based on scientific analysis, “in some cases, companies may have been inclined toward an over-reliance on an individual catastrophe model’s output in their decision-making,” suggests Rick Thomas, Willis Re’s head of model research and development. “Now insurers must improve their own analytical capabilities to truly understand the models they use to quantify and communicate the risk in their portfolios,” Thomas says.

The integrated approach, adds Cavanagh, “helps clients to establish their own objective view, using what is best for individual needs, not what is simply available off-the-shelf.”