With catastrophe losses spiraling the world over, and with India possibly going in for a liberalized era of detariffing, predictive catastrophe models are likely to play an increasingly important role in the insurance industry. The article is an insight into what difference they will make to the insurance industry in future.

It may sound incredible, but close to a third of the insurers catering to the US market have ceased to exist over the past 15 years. Ostensibly, this could be attributed to the intensifying competition that acted as a double-edged sword, hemming in both top line revenue growth as well as bottom line profitability. But not all of it was due to competition, per se. Part of it was also due to a change in the nature of competition. So, a major part of this virtual shakeout that has been characterizing the industry for more than a decade is also due to the capability of insurers to harness new technologies to estimate losseseven before they took place. It was more a question of "Fore warned is fore armed".

Pre-empting losses is a major prerequisite today, in a milieu of rising and otherwise inestimable claims that pour in after every mega catastrophe. This will become even more of a truth as ratemaking is liberalized with the onset of detariffingas will happen in India expectedly in 2007. That is, when insurers will no longer have the comfort of handholding by Tariff Advisory Committee that will lay down the premiums on large claims sectors not just as motor, but also in Property &Casualty and Business Interruption (that are more closely associated with both categories of catastrophes). India has one additional comfort over the US, howeverprecedents from other countries' experiences. What do these precedents tell Indian insurers?

Insurance Chronicle Magazine, Catastrophe Models, Insurance Industry, Tariff Advisory Committee, Business Interruption, Global Industry, Information Technology, Insurance Risk Managers, Risk Management Strategy, CAT Modeling, Probability Distribution, Terrorism Risk Insurance Act , TRIA.