Pros and Cons of Catastrophe Modeling
Catastrophe modeling used to be considered very complex and difficult to use. Just a few decades back, most insurance companies were either unwilling to or unable to use catastrophe models. However, over the past couple of decades, the field of catastrophe modeling has seen rapid change.
The increase in computing power has led to catastrophe models becoming more and more accurate. As a result, it has now become a very important part of the reinsurance industry. There are advantages as well as disadvantages that accrue as a result of using catastrophe modeling.
In this article, we will have a closer look at both the advantages and disadvantages.
Benefits of Catastrophe Modeling
There are several distinct advantages of using catastrophe modeling. Some of these advantages have been listed below:
Drawbacks of Catastrophe Modeling
Even though catastrophe modeling is considered to be a huge advancement in the field of reinsurance, it still has several drawbacks. Some of the most important ones have been listed below:
The fact of the matter is that catastrophe modeling has several pros as well as cons. However, with the passage of time, the drawbacks are being neutralized and the advantages are increasing. This is the reason that it can be considered to be an emerging technology in the reinsurance domain.
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