The Truth is Powerful
Cat models don’t properly reflect climate change: RenRe CEO O’Donnell
In comments made this afternoon during the second-quarter earnings call of Bermuda based reinsurance and third-party capital management specialist RenaissanceRe, the companies CEO Kevin O’Donnell said the catastrophe modelling vendors are failing to robustly capture the effects of climate change. O’Donnell’s comments suggest a lack of confidence in the commercially available vendor catastrophe models at one of the largest underwriters of property catastrophe risk.
That could be a concern for model vendors, as typically if one underwriting ethos loses confidence, others could follow.
“I wanted to address one of the major factors behind the market’s perception of property cat risk, and that is the poor historic performance of cat models,” O’Donnell began, adding, “In no small part, this is due to an over reliance on vendor models that inadequately capture the growing influence of climate change.”
He continued to say, “At RenRe, our scientists believe that the commercially available models do not properly reflect climate change as an evolving phenomenon.
“Some perils, while vendors may have adjusted their views to reflect recent experience, we believe that they have not robustly captured the physics of climate change.
“From a risk management perspective this means that the vendor model outputs are likely to underestimate the risks […]