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Old 08-09-2019, 09:34 AM
dmw dmw is offline
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Default When is a catastrophe a catastrophe

Is there any official designation of an event being called a catastrophe? I seem to remember in my previous job that the NAIC or some other insurance organization would declare whether events were considered catastrophes or not. Thanks.
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Old 08-09-2019, 02:02 PM
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Verisk / ISO assigns catastrophes a serial number and keeps a database of them. They use a $25 million threshold

https://www.verisk.com/insurance/pro...erial-numbers/

That is the only official industry wide definition I have seen used.
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Old 08-10-2019, 12:10 PM
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A company may choose its own definition for internal purposes. You may have an occurrence affecting several policies that is not a $25 million industry event that you want to keep track of internally. The policies may aggregate for reinsurance purposes.
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Old 08-12-2019, 12:51 PM
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A company may choose its own definition for internal purposes. You may have an occurrence affecting several policies that is not a $25 million industry event that you want to keep track of internally. The policies may aggregate for reinsurance purposes.
I think that a company may also use their "internal" definition to segregate their data for purposes of developing their rate indication.

That is, only "non-cat" data is used for the detailed analysis with a "cat load" used to capture the remaining costs.
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Old 08-13-2019, 12:50 AM
jerrytuttle jerrytuttle is offline
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Default The ISO Cat definition

Also, the ISO cat definition is only for industry events, affecting a large number of insureds/policies.

It is not hard for a single insurer to have a $25 million claim affecting one or maybe two insureds/policies, and certainly you want to keep track of it separately from the rest of the book, but this is not an ISO cat.
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Old 08-13-2019, 08:36 AM
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Note also that while ISO cats are fairly standard definition within the US, other definitions apply abroad.

I'm aware of one non-US carrier that defines a "cat" as an occurrence that causes the company gross losses in excess of a certain threshold....so their "cats" may not necessarily be the same events described as "cats" by other carriers.
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Old 08-13-2019, 08:36 AM
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Thanks for everyone's help! I will consider all this information in contributing to my company's handling of catastrophes.
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Old 08-13-2019, 08:39 AM
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Quote:
Originally Posted by Ken_Williams View Post
Verisk / ISO assigns catastrophes a serial number and keeps a database of them. They use a $25 million threshold

https://www.verisk.com/insurance/pro...erial-numbers/

That is the only official industry wide definition I have seen used.
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Originally Posted by jerrytuttle View Post
Also, the ISO cat definition is only for industry events, affecting a large number of insureds/policies.

It is not hard for a single insurer to have a $25 million claim affecting one or maybe two insureds/policies, and certainly you want to keep track of it separately from the rest of the book, but this is not an ISO cat.
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Note also that while ISO cats are fairly standard definition within the US, other definitions apply abroad.

I'm aware of one non-US carrier that defines a "cat" as an occurrence that causes the company gross losses in excess of a certain threshold....so their "cats" may not necessarily be the same events described as "cats" by other carriers.
All these are correct. Nice job guys.

ETA: VA was correct too
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Old 08-13-2019, 08:51 AM
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All these are correct. Nice job guys.

ETA: VA was correct too
Of course I'm correct!!

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Thanks for everyone's help! I will consider all this information in contributing to my company's handling of catastrophes.
Something to consider is to look at several years of data and develop a distribution of claim costs and claim counts and use something of a "90-ish" percentile as a starting point for making your definition.
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Old 08-13-2019, 09:01 AM
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Thanks for everyone's help! I will consider all this information in contributing to my company's handling of catastrophes.
One other thing you might consider that's not mentioned: modeled vs non-modeled cats. You will want to be able to separately identify losses on modeled perils from those on non-modeled perils.
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