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Article: CAT modeling: a dismal science: why is it so difficult to achieve certainty with CAT models?(COUNTERPOINT)
- Article from:
- Risk & Insurance
- Article date:
- October 15, 2009
- Author:
CopyrightCOPYRIGHT 2009 Axon Group. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Forget economies being called the "dismal science." You want to dabble in a dismal science? Try catastrophe modeling. The best CAT modeling can do, deed the best it has ever done, is to estimate losses from an earthquake or a hurricane. Even at its very best, CAT modeling only comes dose. It offers a window of loss, from $10 million to $15 million, for example, or from $1 billion to $1.5 billion. That's not bad, but it it's hardly good enough.
What risk managers really need from these CAT models is to get the projected losses right. What we need out of our CAT models and modelers is for them to get it right every time. Nobody said it was going to be easy, and CAT ...