Catastrophe Models

Actuaries (professionals who study, measure and predict risk) use mathematical simulation models called catastrophe models (or Cat Models, for short) to produce estimates of damages and losses along with the probability of their occurrence.

Watch the videos, below, for an explanation of how Cat models work (full screen recommended)

Video attribution: “Catastrophe Models – Part 1” by Todd Thexton, Financial Impact of Climate Change, Adaptation Learning Network is licensed under CC BY 4.0.

Video attribution: “Catastrophe Models – Part 2” by Todd Thexton, Financial Impact of Climate Change, Adaptation Learning Network is licensed under CC BY 4.0.

Read more about how actuaries use catastrophe models (like the one introduced in the video) in Chapter 2 (pp. 16 – 21) of CISL’s Physical risk framework: A primer for investors and lenders on insurers’ natural catastrophe models for extreme weather perils. In Cambridge Institute for Sustainability Leadership (CISL). (2019). Physical risk framework: Understanding the impacts of climate change on real estate lending and investment portfolios.