Charles Dickens couldn’t have predicted what has happened in the reinsurance industry the last 10 years. It has been the best of times for coastal inhabitants of the United States, as it has been a full nine years since a major hurricane struck any part of the East Coast. It has been the worst of times for underwriters, as capital infusion created a soft market beyond comprehension.
Executive SummaryTokio Millenium Re's José Miranda reviews developments in catastrophe modeling and provides a list of reinsurer goals associated with models. Looking out at the future of catastrophe modeling, he concludes that reinsurers will place value on a catastrophe model developer's ability to quantify, explain and forecast possible uncertainties of different types of risk.
Conversely, it has been the best of times for catastrophe modelers, with platform and model changes abounding. At the same time, C-levels plod along in the worst of times as a low-interest-rate environment with no end in sight currently prevents the industry from making real investment returns or maximizing book value for shareholders.
As reinsurers in this environment, we have to ask ourselves: How can we innovate to survive?
Can we rely on what’s out there to provide us the solutions we need to stay relevant, given the complex and shifting risk appetites of our clients? How much should we take into our own hands?