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Daily Insurance Industry News
Thursday 15th of November 2018
November 4, 2010

Aon: Solvency II overlooks nat cat modelling advances

by Gill Montia

Story link: Aon: Solvency II overlooks nat cat modelling advances

Aon: Solvency II overlooks nat cat modelling advances

Aon Benfield is warning that natural catastrophe calculations are ignoring 15 years of critical evolution, under the currently proposed Solvency II Standard Formula.

The broker claims the methodology for the standardised scenarios for natural catastrophe modelling overlooks key data features including:

Location granularity (CRESTA zone data is insufficient).

No differentiation by occupancy (residential, commercial or industrial) or construction, age and height.

Single damage function, so no differentiation between buildings, contents and business interruption cover.

No application of limits and deductibles.

Catastrophe risk is a key driver for capital under Solvency II and Aon is therefore providing a suite of Solvency II-friendly services to help its clients make the most of the catastrophe requirements.

The offering includes advice on how re/insurers can use a partial internal model to assign a more appropriate capital charge.

The group’s head of international catastrophe management, Paul Miller, comments: “The proposed Standard Formula for catastrophe is a disappointing backward step in catastrophe modelling.”

He adds: “The next two years are crucial for brokers to provide catastrophe modelling support as re/insurers register internal models with the regulator and demonstrate how they are using advances in catastrophe modelling to obtain a more realistic picture of their risks.”

 

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