Modelling of Catastrophic Events in Insurance and Finance
In every branch of insurance a significant increase in the number of catastrophies and their financial impact is observed. In its series of publications SIGMA on catastrophic events, the Swiss Reinsurance Company gives a systematic review of the evolution of such claims. Its definition of catastrophic event is expressed in number of death (20 or more) or in terms of insured claims. For the latter to be catastrophic one uses lower limits of 10.4 million US$ in shipping, 20.8 in aviation and 26.0 for other branches. Some examples for 1990 are 4.6 billion US$ for winterstorm Daria and 3.2 billion US$ for winterstorm Vivian hitting Europe. In summary for 1990 one has that the insured claims (catastrophics and large claims) reached worldwide a record sum of 17 billion US$. First estimates on hurricane Andrew which recently hit the south-east coast of the USA are for a total loss of at least 20 billion US$ with possible insured claims in the order of 7 billion US$. Whether one looks at summary data across different insurance branches or stratisfies with respect to specific branches (looking at the number of such events or their financial amount) one notices an explosive increase beginning in the mid eighties. For instance, over the period 1970–1990, the number of nature-catastrophies fluctuated around 40 till 1985 (with only a slight increase) before increasing to more than 100 by 1990. Though statistical modelling is still a key factor in the global discussion relating to catastrophic events, one cannot however fail to express ones unease about the present evolution.
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