A recent study conducted by the brokerage firm Aon has brought to light a significant gap within the re/insurance sector concerning the application of catastrophe models. These findings indicate that the current utilization of such models could significantly hinder how effectively firms evaluate potential hazards, allocate financial resources, and react to major disaster events. The survey, titled “2025 Catastrophe Risk Management Survey,” compiled perspectives from leading executives in both insurance and reinsurance about their engagement with catastrophe modeling tools in vital processes like portfolio management, pricing strategies, and emergency responses to natural calamities. This report gains added relevance following Aon's Global Catastrophe Recap for the initial half of 2025, which reported an alarming increase in insured losses from global catastrophe events, reaching at least $100 billion—the second highest figure on record after 2011’s $140 billion.
The study’s revelations paint a concerning picture of the industry’s preparedness. A substantial portion, nearly half (48%) of the insurers surveyed, do not possess licenses for catastrophe models, and only a quarter (27%) maintain specialized teams to rigorously assess the models they do employ. This deficiency in widespread adoption and thorough comprehension of catastrophe models inevitably impacts how insurance entities perceive risks and manage their capital. While over 80% of participants acknowledge the indispensable role of analytics in both risk governance and reinsurance placements, a large majority (almost 60%) of these companies operate with compact catastrophe risk teams, comprising five or fewer individuals. Consequently, they often depend heavily on the insights provided by their reinsurance brokers to interpret complex models, oversee their portfolios, and react swiftly during crises. Furthermore, the survey identified regional discrepancies, with U.S.-based firms being quicker to integrate new catastrophe models, often with less emphasis on climate change, unlike their UK and EMEA counterparts who adopt a more cautious approach, giving greater consideration to climate-related ramifications. Common challenges cited by insurers include the imperative for improved property data quality (68% of participants are actively addressing this), concerns regarding model transparency where projected losses diverge from actual claims, and the ongoing struggle to effectively integrate climate change considerations into their modeling and risk planning (68% are seeking enhanced methodologies).
The insights from Aon's survey underline the critical need for re/insurers to embrace a sophisticated, multi-model approach to catastrophe risk management, deeply rooted in the latest climate science. Katie Carter, Head of View of Risk Advisory for Aon in the Americas, emphasized that such a strategy is vital in today's increasingly complex and volatile global risk landscape. She further highlighted that understanding regional differences in risk management strategies is paramount for identifying appropriate risk transfer mechanisms and optimizing capital utilization. By taking these strategic steps, the re/insurance industry can foster more informed decision-making and build a more resilient and robust global framework. This proactive approach will empower the industry to not only mitigate financial losses but also to protect communities and economies more effectively in the face of escalating natural perils, embodying a commitment to security and preparedness.
