Catastrophe Risk Assessment and Management

Catastrophe Risk Assessment and Management

AIR consultants leverage our industry leading modeling technologies to quantify our clients’ exposure to catastrophe risk so that they can make optimal risk management, risk transfer, and risk mitigation decisions that align with their strategic goals.

Risk Assessment

The starting point of a catastrophe risk assessment is a thorough understanding of our client’s catastrophe risk profile. However, even before the analysis begins, AIR conducts an extensive review of the effectiveness of the exposure data collection process. Incomplete or erroneously coded data can have dramatic impacts on modeled loss estimates.

Probabilities are estimated for various levels of loss that a company may experience given their portfolio of exposures. Results provide the necessary detail to determine which perils, regions, lines of business, policy forms, and even building characteristics, are driving large loss potential.

Ratemaking and Regulatory Support

Catastrophes, by their very nature, are infrequent, severe, and unpredictable, making the use of scarce and erratic historical loss data problematic for pricing purposes. AIR’s consultants advise our clients on ratemaking, particularly in regulated environments, and the appropriate application of the Actuarial Standards of Practice (ASOPs) in using model results. We assist in answering questions posed by regulators, provide expert testimony on behalf of clients at rate hearings, and offer best practices for filing rates with proper consideration of overall catastrophe risk and its allocation to territories and rating classes. We also help clients design rating plans based on risk mitigation features.

Across the United States, AIR Models Are Relied Upon to Support Rate Filings.  

AIR is also committed to helping our clients address the requirements of Solvency II and similar regulatory regimes. AIR consultants work with our clients to ensure that they truly “own” their risk through a deeper understanding of the models they rely on for decision-making, the exposure at risk, the loss potential, and uncertainties in the modeling process.

Underwriting and Mitigation Studies

Results of a catastrophe risk assessment can provide guidance for enhancing underwriting and pricing strategies. Detailed sensitivity analyses allow clients the flexibility to review territory definitions, evaluate the impact of altering policy conditions, and quantify a reasonable per diem value for additional living expense or business interruption coverage.

A detailed analysis of how a property’s structural characteristics affect its vulnerability to natural hazards and how modifications to those characteristics impact potential losses can help clients plan their overall catastrophe loss reduction program. AIR’s consultants perform sensitivity analyses to help clients determine the appropriate level of credit for the presence of various loss mitigation devices.

Enterprise Risk Management

AIR’s actuarial consultants work with our clients to integrate the measurement and management of catastrophe risk into their Enterprise Risk Management framework. They also assist clients in completing rating agency analysis, such as AM Best’s Supplemental Rating Questionnaire (SRQ) and Fitch’s Prism capital model. Finally, AIR consultants advise clients on the efficacy and risk profile of financial protection programs, such as reinsurance and securitizations.

Portfolio Optimization

Portfolio Optimization

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