Gallagher Re’s chief science officer, Steve Bowen, has urged the insurance industry to adopt a multi-hazard approach to natural catastrophe (natcat) modelling rather than treating perils such as floods, hurricanes and wildfires as separate and independent events.
Speaking to InsuranceERM in Chicago, Bowen said: “Look at the recent California wildfires, for example. Just because the fires are extinguished doesn’t mean the risk is over. We should be loudly communicating that these areas face a substantial flood and mudslide risk in the coming weeks, months or years. When the inevitable switch happens from a dry to a wet pattern, there will be a very real risk of further impacts in some areas.”
Hurricanes are frequently associated too with flooding from storm surge and severe rainfall, and the formation of tornados. For example, approximately half of the economic losses from 2025’s hurricane Katrina arose from flooding.
Data quality in natcat modelling also needs to match the technology advances in the area, Bowen said.
He explained that current datasets with known limitations are still being used to train new natcat models and consequently “there will be limits to how much will change in baseline frequency assessments”.
Bowen said he was referring less to the US and more globally because there are still significant natcat data gaps in parts of Asia, Africa and Latin America.
“We need to simultaneously invest in artificial intelligence and technology improvements, but also our observational network. It has been exciting to see technological advancements in natcat modelling that has improved how to account for uncertainty. But we also need to see an improvement in the data quality. The higher quality and more granular data that exists, this should translate to better and more effectively useful results.”
- Read more about wildfire risk modelling in InsuranceERM’s special report Natural Catastrophes: Flood, Fire & Storm, free to download here
