The Role of Scientifi c Modelling and Insurance in Providing Innovative Solutions for Managing the Risk of Natural Disasters - Reducing Disaster: Early Warning Systems for Climate Change - page 320

17.4 Modelling Catastrophes

Catastrophe models are mathematical models (either physical or statistical or a
combination) designed, run and sold by commercial vendors to insurers to assess
risk and estimate the losses from natural disasters (Box 17.2). They tend to be
focused on industrialised countries with established insurance markets.

Box 17.2 Risk Assessment

Probabilistic risk assessment refers to the approach whereby the probability of
exceeding a specifi c loss is calculated using quantitative modelling. At the core
of this risk modelling is the need to determine the relationship between a par-
ticular measure of the hazard (hurricane wind speed or earthquake ground
shaking) and the resulting economic and insured losses. Catastrophe modelling
refers to the computationally intense process of using geographical informa-
tion systems (GIS) to describe the spatial variation of exposure and vulnerabil-
ity for a particular portfolio of buildings. By running numerous simulations of
extreme events that vary in time and space, the catastrophe model assesses the
chances of experiencing losses of different magnitudes. Catastrophe models
can be broken down into three modules describing the hazard, vulnerability
and fi nancial components. Ensuring that each module is adequate relies on
access to a skilled team of scientists, engineers and actuaries.

17.4.1 Open-Access Models

Although traditionally offered as black-box models, there is a trend for the develop-
ment of more 'open-access' catastrophe modelling. Insurers, who use catastrophe
models to assess risk, will benefi t from the improved understanding, availability and
diversity of these open-access models. Open-access models have the potential to
enable more transparency in decision-making.
Behind the trend of open-access modelling is the lack of access to this technol-
ogy in poorer nations. This has hampered governments and aid agencies' efforts to
improve disaster risk management where it is often most needed. The implementa-
tion of risk modelling for disaster risk management in poor nations is therefore one
of the largest driving forces behind open-access modelling programmes. There are
several examples of such initiatives:

(i) The Willis Research Network (WRN) ( www.willisresearchnetwork.com ) sup-
ports open academic research and the development of new risk models and
applications. It aims to provide an open forum for promoting scientifi c research
on extreme events, primarily climate and weather risks, through collaboration