The FSA has announced plans to analyse how catastrophe models are used by insurance companies as part of their risk management.

Julian Adams, head of wholesale insurance for the FSA, said the review would focus on companies' ability to "manage a single or series of major events, either from further natural disasters or from man-made catastrophes or terrorist attacks and how firms identify exposures and manage and mitigate such risks."

Adams said the review, to be launched in February, will be a "common-sense" check, assessing how well insurers' senior management understands what the models are designed to achieve and any other criteria they use to assess "aggregate exposures."

"It is not sufficient (for senior management) to rely on mathematicians, geoscientists and actuaries to produce a 'black box' which only they understand," he added.

Gerry Albanese, president and chief operating officer at Markel said: "A significant percentage of the losses that have occurred have been unmodelled with no premium or capital in place."