Hurricane Andrew was a devastating event with far
reaching consequences. The massive insured loss caused the insurance industry to realize the limitations of relying only on historical loss data and begin to embrace catastrophe models. As part of this shift, Swiss Re hired me as a Catastrophe Assessment Assistant doubling their catastrophe modeling capabilities at the time. So effectively I owe my 25-year career in reinsurance to Andrew.
Prior to Andrew, catastrophe models were still very new and something of a novelty. Most of the industry believed Karen Clark's CATMAP model was much too heavy in Florida. It had been a long time since a major hurricane had hit Florida and it was difficult to believe we could experience such high losses.
Hurricane Andrew changed that proving that very large losses were possible and it was clearly not a worst case event. A slightly more northern track would have resulted in a direct hit to Miami and generated a much larger loss. This knowledge prompted dramatic growth in the use of catastrophe models in the insurance industry.
When I started working at Swiss Re, we typically used state premium data from AM Best as the basis for our modeling. That quickly changed and exposure data aggregated to the county level became the norm. As insurers began using the models themselves, location specific data became common. Today, insurers often provide secondary characteristic data such as square footage and roof age.
In my early days, Swiss Re used catastrophe model results only to manage our US portfolio and updated our portfolio in CATMAP twice a year. Today, we use our own internal model MultiSNAP, often along with vendor models, for risk selection and costing as well as real time capacity management. Catastrophe models are built into all of our processes.
My reinsurance career has grown up right alongside the use of catastrophe models over the last 25 years and the industry has come a long way in that time. And while we don't know where or when the next hurricane will strike, when it does, it's vital we continue our evolution and understanding of disasters like Andrew.
Category: Climate/natural disasters
Location: McMinnville, OR, United States