Insuring The Uninsurable

An actuary from data analytics and consulting firm Milliman tries to make accessible some arcane issues in the world of catastrophe insurance. Possibly the most extreme case in this category, short of terrorism and war, is climate. “With climate change making catastrophe risk both more common and more uncertain, the insurance industry is in danger of seeing more expected losses that are so large they can’t be quantified.”

He says, however, that one way to keep insurers in the game is to reduce what is technically referred to as “correlation.” An example, vis a vis wild fires, would be requiring greater spacing of housing with more defensible space around each house in high risk areas. Another avenue is to increase reliance on reinsurance. That includes reducing certain current barriers to obtaining it.