As climate risk escalates, insurers and reinsurers are increasingly relying on catastrophe modelling to navigate uncertainty. For insurance-linked securities (ILS) managers, these tools go beyond guidance, they are foundational to underwriting discipline, portfolio construction, and investor capital protection, according to a new report from LGT ILS Partners.
In a new report, analysis from LGT ILS Partners, the specialist ILS team of LGT Capital Partners, notes that the catastrophe risk modelling tools used in reinsurance could be described as a kind of high-tech “crystal ball” that forecast natural disaster scenarios and quantify their potential financial impact.
“Catastrophe risk modelling tools use historical data, scientific research and sophisticated computer simulations to predict the likelihood and potential severity of such disasters and the extent of the damage they could cause to the insured properties in the defined area,” the report reads.
This isn’t just theoretical forecasting, it’s a core input for underwriting strategy. “An ILS manager applies such models to first assess individual transactions on a stand-alone basis and to then assess the overall portfolio composition,” the report explains.
FULL ORIGINAL PUBLICATION HERE
