Adityam Krovvidi, Risk Analytics Advisor at ValueMomentum

Modern approach to CAT modeling starts with an objective assessment of materiality of CAT exposure and the CAT modeling function maturity. Many insurers find their current catastrophe maturity is not aligned to their CAT exposure. Insurers must be open to do an objective assessment of their CAT function and willing to invest in closing the gaps of the capability.

They need to decide on the right operating model — in-house, offshore, or a hybrid. A lot of that depends on the specialized CAT modeling skills. In parallel, insurers need to modernize their data infrastructure, adopt AI-enabled tools, and invest in scalable technology.

Equally important, CAT modeling needs to be part of the broader analytics strategy, and also fully aligned with the insurers’ risk and capital framework.

The main challenges holding the insurers back are talent shortage, operating model decisions, data quality and infrastructure gaps, developing their own view of risk, and finally ensuring that CAT modeling is aligned with the enterprise risk management.