WS-3 - Natural Catastrophe Modeling

Loss histories from infrequent but severe Natural catastrophes are not sufficient to warrant using traditional actuarial experience rating to price and/or manage potential risk accumulation. As such, catastrophe models attempt to mirror the scientific nature of the underlying natural phenomena and simulate more robust event possibilities in order to better reflect the uncertainty in the natural catastrophe phenomena. When mirroring the natural phenomena, one of the outcomes is to estimate the tail distribution, i.e. extreme events that are crucial in understanding how best to use the models in real life situations like pricing. This workshop will look at how catastrophe models work, how we might use them in conjunction with extreme value theory, and put it all together where the attendees will work through some examples of using catastrophe model information in pricing.