Insurers can learn from global catastrophes and prepare for the future

Published: July 31, 2018

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Catastrophes are happening more frequently and are more severe, whether natural disasters or man-made incidents. According to one expert, each new event presents insurance companies with an opportunity to learn and grow in terms of risk mitigation, management, and future planning.

Steve Osselton, managing director for Marsh Canada Ltd., told Canadian Underwriter that each catastrophe allows insurers to broaden their skill set and experts will use each event to prepare clients and employees for the future.

Osselton will provide his analysis when hosting a presentation titled After the Storm: Learning From Catastrophes at the RIMS Canada Conference in St. John’s, N.L. on Sept. 23-26, 2018. The executive says insurers can come away with global catastrophes with “key learnings”.

“The first one is that the root cause of many damage losses is management failure to identify and address the basic causation,” Osselton said. “So many times, when you look back, the causation was known, it just wasn’t acted on; it wasn’t necessarily a surprise.”

While mitigation can be undertaken, Osselton admits it is unlikely natural catastrophes can be prevented, but he says some obvious risk mitigations are “hiding in plain sight”. As an example, he cites building homes in areas where sea levels are likely to rise.

“I think modelling companies are doing all they can to stay ahead and be leading edge, but we are facing a future of more severe storms and events in some places that have not traditionally been an issue for us.”

With the climate changing quickly, relying on past data on cat events may be problematic as surprise events are now more likely.

“There continues to be an overreliance on the past to predict the future, particularly with climate change,” he said. “Industry cat models are all calibrated on past events. However, urbanization, global supply chain shifts and greater concentration of economic value can materially shift the impacts.”