Over the past two decades, the use of computer modeling to estimate potential future catastrophe losses has become standard practice among insurers and reinsurers. Today, modeling technology is increasingly being used by the corporate risk manager to help assess risk and develop strategies to manage it.
Risk management strategies may include transferring the exposure to another party, accepting some or all of the consequences of a particular risk, or mitigating its effects. One thing that should be at the forefront for all corporate risk managers, however, is the need to account and plan for losses resulting from catastrophes.
Whether natural or man-made, catastrophes are unique in their ability to severely and immediately impact a company's profitability. Hurricanes, earthquakes, tornadoes and terrorism can destroy property, interrupt business, injure workers and throw an otherwise profitable company into turmoil.
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