What is Catastrophe Modelling?

Understand your exposure to catastrophe risk before it impacts your portfolio

Catastrophe modelling helps insurers estimate potential losses from events like hurricanes, severe thunderstorms and wildfires—as well as man-made disasters like terrorism and extreme casualty events. By combining data about hazards, your insured properties, and how those properties respond to damage, catastrophe risk modelling provides a clearer view of how your portfolio may perform under different catastrophic scenarios.

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Catastrophe modelling basics: How catastrophe risk modelling works in insurance

Catastrophe modelling in the insurance industry helps insurers prepare for future catastrophic events, enabling them to set more accurate premiums and better prepare for claims. Built from the most current scientific data available, Verisk catastrophe risk models capture how catastrophes behave and impact insurable assets using sophisticated simulation methods. All Verisk catastrophe models are based on a specialised framework.

Event generation

Large catalogs of simulated events capture the frequency, severity, location, and other characteristics of plausible catastrophes.

2446000_New-to-Cat-Modeling_v3_Event Generation

Local intensity calculation

For each simulated event, the model calculates hazard intensity at each affected site, creating a detailed view of how the event behaves across the area at risk.

2446000_New-to-Cat-Modeling_v3_Local Intensity

Exposure data

Property-level information, including location, replacement value, occupancy, construction type, and other physical characteristics, is used to reflect the assets exposed to loss.

2446000_New-to-Cat-Modeling_v3_Exposure data

Damage estimation

The model estimates physical damage for each affected exposure based on the hazard intensity at that location and the vulnerability of the asset.

2446000_New-to-Cat-Modeling_v3_Damage estimation

Policy conditions

After damage is estimated, policy conditions for the property need to be applied before the final insured losses can be calculated.

2446000_New-to-Cat-Modeling_v3_policy conditions

Insured loss calculation

Using Verisk’s next-generation modelling financial framework, policy terms and conditions are applied to estimate insured loss and translate physical damage into financial impact.

2446000_New-to-Cat-Modeling_v3_Insured Loss

What Verisk catastrophe risk models provide

Detailed output from Verisk catastrophe risk models is the basis for understanding and quantifying catastrophe risk. It is the "currency" by which risk is priced, transferred, and traded, and applications today go far beyond those within the insurance industry. Critical metrics produced by Verisk catastrophe models include:

Article

Average Annual Loss (AAL)

AAL is the loss that can be expected to occur per year, on average, over a period of many years.

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Report

Exceedance Probability (EP)

The likelihood that a loss of any given size (or greater) will occur in the coming year.

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Article

Tail Value at Risk (TVaR)

The expected value of loss beyond a specific exceedance probability.

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What is catastrophe modelling's role in your business?

As catastrophe losses increase and portfolios grow more complex across regions, property types, and lines of business, insurers need faster, more consistent ways to understand risk. Traditional approaches, such as periodic portfolio reviews or reliance on external analyses, may not provide the speed, transparency, or flexibility needed for underwriting, pricing, and reinsurance decisions.

For insurers that are newer to catastrophe modelling, it can strengthen several parts of the decision-making process—helping you build a shared, data-driven view of risk across your organization, so teams can ask more specific questions, test different scenarios, and act with more confidence.

Understand what’s driving your risk

See how factors like location, construction type, and hazard intensity influence potential losses—so you know what matters most in your portfolio. Review model assumptions, understand key drivers, and assess results more directly.

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Make faster, more confident decisions

Run analyses when you need them, without waiting on external timelines, so you can respond quickly to underwriting and renewal needs.

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Improve underwriting and portfolio strategy

Use catastrophe insights to guide pricing, manage accumulations, and shape reinsurance decisions.

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Communicate risk with confidence

Support internal stakeholders, brokers, and reinsurers with transparent, data-backed views of catastrophe exposure.

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Connect with our team today to explore tailored solutions for your business

Let's discuss how Verisk's catastrophe modelling solutions can support your business.

Get started with catastrophe risk modelling

You don’t need to build a large in-house modelling team to get started. Many insurers begin with a few focused use cases and expand over time. Verisk can help you create your own phased modelling roadmap, supported by onboarding, training, and client support to move at a pace that works for your organization.

What decisions need better support?

Identify where better visibility into catastrophe risk would add the most value—such as underwriting review, accumulation management, renewal preparation, or reinsurance planning.

Which risks matter most to your portfolio?

Focus on the perils, geographies, and lines of business that are most relevant to your portfolio and consider how you want to use model outputs.

What level of access fits your team?

Select a path that aligns with your resources and goals—whether that’s direct model access for deeper analysis or a lighter entry point to begin assessing risk.

Related resources

Learn more about catastrophe modelling basics through expert-developed content.  Explore training, articles, and other materials to find out more about the risks different types of catastrophes pose to businesses and people, and the science behind how catastrophe models are developed.

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Brochure

Modelling Natural and Man-Made Catastrophe

Both natural catastrophes—earthquakes, hurricanes, tornadoes, and floods—and man-made disasters, including terrorism and extreme casualty events, can jeopardize the financial well-being of an otherwise stable, profitable company.

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Brochure

Verisk Certified Catastrophe Risk Modeler Program (formerly known as CEEM)

Gain knowledge, tools and applied experience to model and manage catastrophe risk confidently and deliver high-impact decisions and leadership in their organizations.

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Article

Catastrophe Exposure Management: Taking More Ownership of the Risk

Is your view of risk keeping pace with your portfolio?

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Flyer

3 Reasons Primary Insurers are Investing in Catastrophe Models

As catastrophe risk questions become more frequent and more specific, many primary insurers are looking for a reliable way to assess, explain, and manage exposure to such risk across their organizations. Consider three reasons carriers are making the move to in-house models.

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What is Catastrophe Modelling?

Catastrophe modelling basics: How catastrophe risk modelling works in insurance

What Verisk catastrophe risk models provide

Average Annual Loss (AAL)

Exceedance Probability (EP)

Tail Value at Risk (TVaR)

What is catastrophe modelling's role in your business?

Understand what’s driving your risk

Make faster, more confident decisions

Improve underwriting and portfolio strategy

Communicate risk with confidence

Connect with our team today to explore tailored solutions for your business

Get started with catastrophe risk modelling

What decisions need better support?

Which risks matter most to your portfolio?

What level of access fits your team?

Related resources

Modelling Natural and Man-Made Catastrophe

Verisk Certified Catastrophe Risk Modeler Program (formerly known as CEEM)

Catastrophe Exposure Management: Taking More Ownership of the Risk

3 Reasons Primary Insurers are Investing in Catastrophe Models

Do more with the Verisk ecosystem

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