Boston-based AIR Worldwide Corporation has released a white paper entitled “Analyzing and Preparing for Multiple Event Seasons,” which it said demonstrates how the industry can “prepare for multiple catastrophes in a single year.”
The four Florida hurricanes and other events inspired AIR, a leading provider of catastrophe analysis and risk modeling, to examine possible solutions. The white paper includes a detailed explanation of how insurers can explicitly account for the probability of multiple events in a single year. A case study demonstrates techniques insurers can use to manage the risk of multiple-event and multiple-peril years.
“The 2004 hurricane season was a trying time for many insurers including Florida Farm Bureau,” noted Rade T. Musulin, ACAS, MAAA, VP – Operations, Public Affairs, & Reinsurance at Florida Farm Bureau, which writes exclusively in the state of Florida. “However, using AIR’s catastrophe models, we were able to design a reinsurance program that accounted for both frequency and severity of catastrophic events, allowing us to absorb these losses without significant financial disruption. AIR’s systems, which we’ve been using for a number of years now, are an integral part of our catastrophe management program.”
AIR said the “white paper provides insurers with practical techniques for analyzing and preparing for multiple-event and multiple-peril seasons. A case study illustrates how AIR systems can be used to determine the probability that zero, one, or multiple events will occur in a single season, as well as the probability that some or all of those events exceed the company’s retention. The white paper concludes with several examples showing how companies can ensure that they have adequate reinsurance protection both from single large losses and from multiple losses in a single year.”
AIR’s President and CEO Karen Clark commented: “All of AIR’s catastrophe models provide the probabilities of multiple-event seasons. They also enable users to estimate the losses to their portfolios from the individual events that make up a multiple-event season. The techniques described in this white paper provide a resource for insurers actively engaged in improving their catastrophe risk management strategies.”
“Analyzing and Preparing for Multiple Event Seasons” is available at http://www.air-worldwide.com/_public/html/whitepaper.asp.
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