Catastrophe Models Incorporate Current Climate Data to Assess Risk

Catastrophe modeling vendors are increasingly incorporating current climate and environmental data into their models, potentially changing how insurers and reinsurers assess natural catastrophe exposures, according to Howden Re's November 2 article, A Changing View of Risk: What the Next Generation of Catastrophe Models Means for (Re)Insurers.

According to the article, Verisk has introduced a "near-present climate" approach in its updated hurricane model, following similar changes to its wildfire and severe convective storm models. The approach places greater emphasis on current and near-term climate conditions rather than relying primarily on long-term historical averages. Moody's RMS is expected to introduce comparable changes in its hurricane model in 2027.

The article noted that newer models also provide greater flexibility to evaluate catastrophe risk under different climate conditions. For example, Verisk's updated hurricane model allows users to examine simulated events associated with specific El Niño–Southern Oscillation phases and Atlantic Ocean temperatures. Moody's RMS plans to incorporate additional climate indicators into its forthcoming hurricane model.

However, Howden Re cautioned that more sophisticated modeling does not necessarily provide greater certainty. Changes in modeled losses may reflect updated assumptions and methodologies rather than equivalent changes in underlying risk.

"No single model will give the industry the full picture," said Anna Pergerson, managing director and head of catastrophe research and development at Howden Re. "The firms that test new capabilities carefully and combine models with their own analysis and specialist expertise will be the best placed to understand how their exposures are changing."