Catastrophe models have been called out as failing to account for so-called “supershear” earthquake events, with specialist Lloyd’s re/insurer MS Amlin stating that models “are failing to factor in a little-known class of earthquake despite it being linked to two thirds of industry losses from seismic events in the last decade.”
For those underwriting insurance and reinsurance, or investing in catastrophe bonds and insurance-linked securities (ILS) with exposure to earthquake risk, this means there is a “blind spot” on potential major earthquake loss events, MS Amlin’s research suggests.
The study by the re/insurer suggests that earthquake risk may be underestimated by as much as 60% in extreme cases.
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