🇦🇺Australia

Decision Errors in Catastrophe Modelling

2 verified sources

Definition

Catastrophe loss modeling requires rigorous validation of inputs, outputs, and assumptions to avoid decision errors in reinsurance purchasing and capital allocation. Failure to document data transfers, reconcile outputs, or assess model limitations results in unreliable PML estimates and unsuitable reinsurance structures.

Key Findings

  • Financial Impact: AUD 10-50M+ in unreserved losses per major event due to model discrepancies; global AAL $152B with Australia exposed to cyclone/earthquake/bushfire[1][4]
  • Frequency: Annual, per modelling cycle or reinsurance renewal
  • Root Cause: Manual data handling, lack of controls for model inputs/outputs, unassessed non-modelled perils like bushfire/flood

Why This Matters

The Pitch: Claims Adjusting and Actuarial Services firms in Australia 🇦🇺 risk millions in underreserved losses from model errors. Automation of data validation and reasonableness checks eliminates this risk.

Affected Stakeholders

Actuaries, Underwriters, Reinsurance Managers

Deep Analysis (Premium)

Financial Impact

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Current Workarounds

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Methodology & Sources

Data collected via OSINT from regulatory filings, industry audits, and verified case studies.

Evidence Sources:

Related Business Risks

Cost Overrun from Loss Adjustment Expenses

AUD 10-30% overrun on gross losses from unmodelled LAE and demand surge; contributes to $145B insured losses in 2024[1][8]

Capacity Loss from Model Uncertainty

20-50 hours per model validation cycle; opportunity cost AUD 5,000-15,000 per renewal at AUD 250/hr actuarial rates[1][3]

Fehlentscheidungen bei Tarifindikation durch unzureichende, nicht standardisierte Aktuariatsdokumentation

Quantified (logic-based): Bei einem Portfolio mit AUD 200 Mio. Jahresprämie führt eine 1–3 % systematische Unterpreisung oder nicht realisierte Erhöhung zu 2–6 Mio. AUD jährlichem Ergebnisverlust; skaliert auf mehrere Linien kann dies 5–15 Mio. AUD p.a. übersteigen.

Überhöhter manueller Aufwand bei der Erstellung von Aktuariatsunterlagen für Tarifgenehmigungen

Quantified (logic-based): Typisch 100–200 Aktuarsstunden pro Filing à ca. AUD 250–350/Stunde = AUD 25.000–70.000 direkter Aufwand je Tarifrunde; bei 6–10 Filings pro Jahr entstehen 150.000–700.000 AUD jährliche Personalkosten, wovon 40–60 % (60.000–420.000 AUD) durch Automatisierung und Standardisierung reduzierbar sind.

Experience Rating Premium Surcharges

AUD 10-25% premium increase (e.g., EMR 1.1 multiplies base premium by 1.1)

Manual EMR Calculation Delays

20-40 hours/month manual labor at AUD 100/hr = AUD 2,000-4,000/month

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