Models that enable better risk assessment

Both insurers and reinsurers are facing an increased number of risks associated with geopolitical instability, making it essential to carefully assess these risks when issuing quotes. This involves better understanding the maximum potential damages, as well as improved pricing with clearer terms for insurance and reinsurance. To achieve this, they primarily rely on risk modeling tools, which allow them to better assess the potential scale of such damages.

Although predicting the timing of damages and their amounts and consequences is challenging, risk modeling provides insurers with added security and necessary assessments, considering the rise in damages caused by SRCC risks. Over the past 20 years, damages caused by geopolitical instability have increased by more than 3,000 percent, a trend influenced by the growth of the global population and increased participation in such events.

One such model offers insurers a new approach to evaluating and analyzing emerging risks. The use of this model is based on real data regarding damages incurred, with a focus on data analysis, parameter estimation, and the payout amounts. By using these new modeling tools, damages can be successfully modeled, which directly impacts risk assessment and premium pricing.

With global political and economic instability, reinsurers need new and better solutions to predict where large damaging events will happen.