Nunn urges market to focus on open source risk modelling
Lloyd's head of exposure management, Paul Nunn, has told insurance and reinsurance leaders that the industry needs a better appreciation of model uncertainty when preparing for major catastrophes to ensure that they are not over-exposed when disaster strikes.
Speaking at the 20th annual international reinsurance congress in Bermuda, Nunn suggested that the time was right for the industry to develop the concept "open source risk modelling".
Nunn said that an open source platform would allow an insurer to choose from a suite of hazard modules, some from the traditional loss modellers on a proprietary basis and some from the wider academic community. This would provide users with a plurality of modelled views of risk which would help users more intuitively appreciate the range of answers depending on the choice of assumptions.
"Open source modelling will present a platform where user can more easily see the levels of uncertainty within a risk, which would be healthy for the industry," he said.
"Following the 2005 US hurricane season, the agencies learned a number of lessons and went away and came back with radically new models. This actually gives the industry, including rating agencies and regulators, serious challenges to adapt to a changed world view."
