Society for Earthquake and Civil Engineering Dynamics
Natural catastrophes worldwide lead to billions of dollars of economic as well as insured losses annually (Munich Re, Nat Cat Service). Catastrophe models are generally used to produce views of natural catastrophe risk. The insurance and reinsurance industry utilizes catastrophe models to develop risk metrics for insurance premium pricing, reinsurance contracts and capital market instruments. One of the key components of catastrophe models is the vulnerability of the insured risks, i.e. the building stock. This paper will introduce the concept of catastrophe modelling, insurance and reinsurance and the impact vulnerability makes on insurance premium and reinsurance metrics. It will then discuss the common drivers of vulnerability from physical and economic perspective making reference to earthquake and wind perils. The challenges of characterization of vulnerability are then discussed focussing on the drivers of vulnerability with examples from European earthquake and wind events.