Mark Weatherhead, Head of Model Development - International
There are two main lines of development. First, (re)insurers need to gain a deeper understanding of how the existing commercial vendor models perform for their book of business, how the models can be best modified or customized to better reflect their own loss history, and how the models compare to each other. Second, (re)insurers need to continue to address gaps in knowledge that are not adequately covered by existing models.
As this is an expensive, complex and time-consuming effort, the current trend is for companies to choose a single platform as their primary model and then complement where necessary with a secondary model.
We have seen greater interest in using the Oasis Loss Modelling Platform as a secondary modelling platform. It provides an open-source way of bringing models from many providers onto a common framework - including smaller commercial and academic teams and in-house developed models - and allows the insurer to do so without recourse to a third party.
As windstorms and earthquakes are modelled by more than one vendor, the biggest challenge for Europe is flood. Europe is somewhat unusual in that it has countries with small geographies and comparatively large rivers. Single flood events can hit more than one country and create correlation issues for insurers and reinsurers. The most notable example of this is the River Danube, which touches 10 countries as it makes its way from Germany to the Black Sea.