Risk Management Solutions (RMS) and Guy Carpenter & Company, LLC have each released models to assist insurers in managing catastrophic risks, one on the property side, and one on the casualty side.

Guy Carpenter's New York office said its model helps insurers and reinsurers by finding previously concealed casualty vulnerabilities.

Newark, Calif.-based RMS said it was releasing an upgrade to its Simulation Platform designed to address the “clustering” effect of hurricanes – where a sequence of meteorological events occurs within a close period of time and space.

RMS noted that scientists have recognized that a single catastrophe tends to increase the likelihood of additional events happening shortly thereafter in the same region.

Anu Sandhu, senior product manager of the RMS Simulation Platform, said, “Looking back over the past five years, for example, there were more than four U.S. land-falling hurricanes in 2004 and 2005, followed by none in 2006 and 2007. Rather than just looking at average event frequency over a certain period of time, the Simulation Platform allows clients to assess the probability of, say, having another year like 2004 or 2005. Essentially it provides additional insight into how events vary year on year.”

The upgraded platform also includes an “advanced seasonality” feature, allowing the industry to “more accurately model seasonal patterns of event frequency and severity.”

On the casualty side, Guy Carpenter introduced its Casualty Cat Model, developed jointly with Arium, Ltd., which allows casualty insurers and reinsurers to track exposures resulting from a casualty risk that may be hidden or affect insureds across multiple lines of business.

Guy Carpenter said, “The Casualty Cat Model allows insurers and reinsurers to study single- and multi-peril casualty catastrophe risks in the context of their broader risk management strategies. By rigorously analyzing trading and supply chain data, the model helps carriers assess their key vulnerabilities, providing a sound foundation for risk transfer planning and execution.”

A briefing prepared by Guy Carpenter outlined the challenges insurers have faced regarding casualty risks. It noted that while property risks, such as hurricanes, tend to recur in similar patterns and in similar areas, casualty risks are “more nebulous.”

For example, the briefing said that Florida will always be exposed to hurricanes, but Enron will not likely commit energy market manipulation and off-balance sheet transactions again.

“Until recently, it has been almost impossible to manage casualty catastrophe risk effectively. Carriers have not had access to sufficient data, and modeling capabilities had not kept pace with the complexity and multiplicity of perils,” the briefing stated.

David Lewin, managing director, Guy Carpenter, said, “This new model helps risk bearers take action by revealing previously concealed vulnerabilities.

“Identifying and remedying casualty catastrophe risk is a complex challenge that requires a highly systematic approach. By uncovering the many risks buried deep within portfolios, Casualty Cat arms insurers and reinsurers with a new set of tools to address the relative unpredictability of casualty exposures.”