KCC will provide global cat coverage within 18 months, says founder

Karen Clark and Company (KCC) will offer full global coverage in its catastrophe modelling within 18 months, according to Karen Clark, the company’s founder.

KCC already offers models for the peak peril catastrophes of US wind and earthquake, European wind and Japanese typhoons and earthquakes. Its focus now is on building out its models in other areas such as Latin America and Asia, so its clients can model cat risk anywhere in the world.

“We pride ourselves on our differences from other cat modelling companies,” Clark said.
“We have spent more time with senior executives, getting a strategic view about what they want from the risk models, and what they are not getting.”

This has allowed KCC to focus on areas its competitors have largely ignored, building new types of models to quantify different types of risk.

“The EP curve and other traditional metrics are great for pricing and telling insurance companies how much reinsurance they need, but they don’t tell them much about underwriting, about where they should be taking more or less risk,” she explained.

The market has been unhappy about the aggregation of smaller or medium size losses, said Clark, so KCC has addressed that.

“Models tend to be focused on the one-in-100 loss event, and much less on the more frequent, medium size events,” she said.

“Insurers pay out $25 billion a year for damage related to severe convective storms in the US that is more than for US hurricanes, which cost insurers on average $15 billion a year.”

Clark believes a lack of transparency, especially at the individual account level, has severely undermined confidence in models, encouraging people to use multiple models and blend the different views of risk they get from them.

“That is very inefficient,” she said. “You have to hire staff to manage each one, and you have to figure out the best way to blend them. It is costly and you end up with a figure you have no real confidence in.”

KCC’s aim is to provide models that are so accurate that its clients do not feel the need to hedge their bets by getting second and third opinions.

“People ask what drives me, and the answer is developing more accurate models,” Clark concluded.