Block course

Titel: Insuring Catastrophe Risk: Catastrophe Models, Model Creation, Portfolio Risk Management and Prizing

Instructor:  Dr. Gero Michel

Credit: 1 course

Term and Duration:  Winter term, 1 week (5 days)

Registration: see link at the bottom of the page

Description: Natural and man-made catastrophes continue to a) change the insurance and reinsurance world, b) demand the largest amounts of insurance and reinsurance capital, and c) drive the fortune or misfortune of companies. Catastrophe risk assessment has evolved significantly over the last two decades, creating catastrophe-specific consulting companies and vendor models, as well as a new breed of employees called modelers. However, very few science organizations have been successful in the catastrophe insurance world despite the fact that there is a significant need for science in the area. A few private vendors have however been successful and made significant returns with highly expensive tools and models. Catastrophe reinsurance, so far the largest consumer of catastrophe models and consulting, also is seeing considerable rate softening, a change that has not yet been reflected in vendor model licensing fees and consulting costs.

In this course we will examine the following questions: 

What do insurance executives mean when they talk about catastrophes? What is needed to understand, price, and assume catastrophe risk? How are insurance and reinsurance deals structured? What supply chain is needed to understand and insure risk? What is covered and what is excluded in policies and how are policies evolving? What is a market cycle? What models and model platforms are currently available? How is a catastrophe model created and what does it entail? How is the hazard and financial side of risk modelled? Which territories and perils are covered? What is not modelled? What is the role of a modeler? How are catastrophe risk portfolios constructed and managed? What needs to be reported to CROs, CEOs, company boards, regulators or rating agencies? Are models and processes efficient and accurate? Will the ultra-hard catastrophe vendor model market change?

This course aims to provide insight into the catastrophe insurance and reinsurance market and the products, tools and models it uses to quantify, assume and manage risk. The first section (1) will concentrate on introducing students to the catastrophe insurance and reinsurance market, its products, and decision making processes. The second section (2) will then focus on models and model creation from hazard to financial risk and will provide insight into how these tools are created and why they are deemed to be capable of analyzing global risk ranging from assessing single risks to managing global portfolios. The last section (3) will shed a critical light on the current processes in the catastrophe market, will target the offset between supply and demand in risk assessment, discuss whether current models and processes actually do what they are supposed to do and whether current catastrophe insurance risk management is efficient or likely to change. A major theme throughout the course is the clash in communications, behavior and thought between the insurance market and science which continues to hinder their convergence.

Evaluation Criteria:

Evaluation tentatively will consist of the following:

a) Daily questionnaire/quizzes (30%);

b) Design and creation of a model (30%); and

c) A report (40%) on topics to include but not limited to:

(i) What might be needed in the market in the future.

(ii) How could we quantify the shortcomings in the current market.

(iii) How can catastrophe insurance risk be managed and priced.

(iv) Describe how to program an end-to end catastrophe model.

Gero Michel
Dr. Michel is Senior Vice President, Head of Risk Analytics of Montpelier Re. Dr. Michel joined the Montpelier Group in July 2012 in order to head up risk analytics, a task that involves innovations in risk management, underwriting strategy, as well as the Montpelier Group's own view of risk and risk modelling and liaison with external knowledge centres, brokers, and scientists globally. Prior to joining the Montpelier Group, Dr. Michel was Managing Director of the largest existing joint venture between science and the financial industry, the Willis Research network, along with heading up model development at Willis in London. Prior to this, Dr. Michel headed up international cat underwriting at Endurance Specialty Holdings Ltd., in Bermuda; led the windstorm and flood model development at Risk Management Solutions, Inc. and was a senior actuarial analyst at Hannover Re. Dr. Michel has a PhD and masters in geo-science, was lecturer at Western Ontario, London Ontario, Canada as well as Freiberg University in Germany, had a career in geoscience and has a senior level education from Harvard Business School. He has been an invited lecturer at numerous insurance and science events, has published various risk and insurance articles, and has been invited to various panel discussions on risk and cat management. He has over 29 years of experience in risk management and risk modelling.

Choose the following link to sign up and access the course contents:
https://ilias.studium.kit.edu/goto.php?target=crs_473826_mem&client_id=produktiv

Previous events

Exploring European Extremes: An Afternoon with Willis
Willis would like to invite you to an afternoon of insights from the Willis Research Network (WRN). The event, which is to be held from 14:00-17:00 on May 13th, will cover some of the most recent developments by the WRN and how these are being implemented in re/insurance risk management decision making.
First, we will explore European Hail.  We have seen two successive years with significant hail losses in Europe. “Ela” in June 2014 hit France, Belgium and Germany causing billions of euros worth of damage, whilst the summer before saw similar insured losses, again in Germany, when “Andreas”, “Franz” and “Manni” hit the country.  This session will feature Dr Michael Kunz, WRN Senior Academic and Deputy CEDIM Coordinator at the Karlsruher Institut für Technologie (KIT), and look at the Hail phenomena and include discussion of the advanced Willis probabilistic European hail model developed with KIT.
	The second session will be led by WRN Senior Academic Professor David Stephenson from the University of Exeter, who will provide you main updates from ongoing research into European Windstorm Clustering. As it becomes part of the regulatory view of wind risk In Europe, capturing true clustering behaviour continues to be at the leading edge of WRN research .  Geoff Saville, WRN Atmospheric Scientist, will conclude the session with an overview of European Wind analytics capabilities at Willis.
The event will feature introductory and closing remarks from Dr Rick Thomas, Willis Re Director of the Willis Research Network, including a contextual overview of the current re/insurance market. Following the event there will be a chance to network over drinks. Please feel welcome to forward this invitation to other contacts who may be interested.  The event is free, but registration is required at wrn ∂does-not-exist.willis com.  For more information on the Willis Research Network please visit http://www.willisresearchnetwork.com.