General insurers look at risk modelling for natural catastrophe covers

Insurers consider these steps as losses through catastrophes have risen in the past two years

General insurance companies are now looking at risk modelling and analytics for the natural catastrophe segment. This is being done through solutions provided by experts to ensure that that they are adequately prepared to deal with these risks. 

Nymphea Batra, senior vice-president, leader — reinsurance treaty, Marsh India said, “Non-life insurance companies are increasingly emphasising on the use of analytics to quantify risk exposures arising from natural catastrophes. We have an array of catastrophe modelling and risk modelling solutions which assist insurance company's at underwriting itself.”

She added that with the increasing frequency of insured losses in the natural catastrophes, the demand for reinsurance is likely to go up. Companies have faced losses of Rs 10,000-11,000 crore overall in the past two to three years due to the natural catastrophe incidents in the country. 

Industry experts said that since adequate protection against ensuing risks are not available, such cat modelling will enable them to make better decisions at time of accepting risks and price it more correctly. Concepts like catastrophe bonds were also explored, but due to market conditions it was not launched in the country.

More and more insurers will also look at segment and area-specific risks so that those prone to incidents like floods and earthquakes could be viewed differently than the others. For a more sustainable market, Batra said that some price correction in the underlying primary market is also required.