A study on marine cargo exposure due to natural hazards

Abstract

This paper aims to understand and explain the following strange phenomenon that exists in the marine cargo insurance industry today: Marine cargo insurers are not adopting the usage of catastrophe modeling in their underwriting process, despite the substantial risks that natural catastrophes can pose to the sustainability of their insurance portfolio.This paper will then discuss the benefits of the implementation of catastrophe modeling into the risk assessment stage of underwriting. There are two main applications and benefits that this paper will analyze:

1. The usage of catastrophe modeling in rate-making and

2. The usage of catastrophe modeling in insurance portfolio management.

Challenges pertaining to the implementation of catastrophe modeling within the realm of the marine cargo insurance industry will also be analyzed within this paper, along with a write-up of possible solutions with respect to these issues.