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ABI publishes good practice guide on assessment of Non Modelled Catastrophe Risks

The ABI today publishes a good practice guide to help the insurance market better identify, assess and manage non-modelled aspects of global catastrophe risks.

‘Non-Modelled Risks – A guide to more complete catastrophe risk assessment for (re) insurers’ (pdf 3MB) will help the industry to better identify, assess and manage risks  that may not be included in an insurer’s current catastrophe modelling approach. Examples of these risks may include the threat of fires and tsunami following an earthquake, or looting in the aftermath of a major flood.

Significant non-modelled losses from global catastrophes have included:

  • Fires, floods and looting following Hurricane Sandy that hit New York, much of the USA’s east coast and the Caribbean in October 2012.
  • Flooding to industrial parks exacerbated by the need to defend Bangkok from the severe Thailand floods of summer 2011.
  • Aftershocks following the earthquake in Christchurch, New Zealand in February 2011.

The guide, drawn up by a working group comprising of representatives from insurers, reinsurers, reinsurance intermediaries, Lloyd’s, catastrophe model vendors and catastrophe model consultants, outlines:

  • A common definition of what may constitute a non-modelled risk
  • Effective governance of such risks within an organisation
  • Methods of identifying such risks. For example, assessing current and potential future exposures, analysing past claims, and using expert option and analysis
  • Methods of quantifying non-modelled risks
  • Modelling implications

Hugh Savill, the ABI’s Director of Regulation, said:

"This guidance helps fill a gap in the market. While the insurance industry has considerable experience and expertise in identifying and assessing global catastrophe risks, this collaboratively-written paper introduces recognised good practice to help the industry better understand and manage non-modelled risks that can arise from common global insurance business.”

Read the ABI guide: ‘Non-Modelled Risks – A guide to more complete catastrophe risk assessment for (re) insurers’ (pdf 3MB)

Last updated 01/07/2016