Preparing effective rating agency presentations is important to most companies, but when it comes to articulating catastrophe risk and large loss potential, there can be a disconnect between what insurers and reinsurers think the rating agencies want and what the agencies actually want.

Executive Summary

Using her frequent interactions with rating agencies as a guide, catastrophe risk expert Karen Clark dispels some myths about what agencies want to know about the use of catastrophe models by carriers they rate and about carrier cat loss potential. It's not about the model, she says, but about the model assumptions selected and the credibility of the loss estimates.

For full disclosure, the author has never worked for a rating agency. This article is based on frequent interactions and detailed discussions with the major rating agencies over the past several years to determine what they really want to know and what’s most important for demonstrating effective catastrophe risk management. It highlights what these investigations have revealed and dispels some common misconceptions, such as:

If you’ve been using one model for a while, you have to continue using that model. (False) You will be viewed in a better light if you blend models. (False) You have to use at least one of the three major vendor models. (False)

Switching Your Primary Model

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