CONTENTS
What is a Catastrophe model? A catastrophe model (Cat model) is a tool used to estimate the potential impact of natural hazards on assets and infrastructure. It combines information about the hazard itself such as their frequency and intensity, the location of assets, and how vulnerable those assets are to calculate possible financial losses. Typical outputs are hazard maps and forecasted losses at different return periods.
Example in context
Insurance companies use catastrophe model outputs to structure insurance policies; i.e., determine payout structues and premiums.
Why it matters
Insurers, investors, asset and risk managers use cat models to assess their long-term exposure to the modelled hazard, which then provides the basis for risk reduction measures. Catastrophe models help to understand natural hazard risk and thereby facilitate informed decisions about resilience planning.
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