What is a catastrophe model? by Oasis.
- Coverage: The scope of protection provided under a contract of insurance; any of several risks covered by a policy. It can be defined as buildings, contents, business interruption (BI) or time element coverage, other.
- A site, comprises a group of structures (locations).
- A structure is a single location and what is insured. It is associated with one or more insurance coverage.
- A policy is a specific type of financial structure that applies to a set of locations. Multiple policies can exist under the same account and can apply to the same set of locations.
- An account comprises a group of policies and locations.
- A portfolio comprises a number of accounts. Primary financial structures cannot apply at portfolio level, however reinsurance structures can.
- Exposure: The risk or loss potential an insurance company assumes from its policyholder in exchange for premium.
- Loss: The occurrence of the event for which insurance pays.
- Peril: The cause of a possible loss, such as fire, windstorm, theft, explosion, or riot, covered in an insurance policy.
- Risk: (1) The chance of loss; (2) The insured or property covered by a policy or application.
- Ground-up loss or GUL or Damage refers to loss with no financial structures applied.
- Gross loss refers to the loss to the insurer net of primary financial structures.
- Net loss refers to the loss to the insurer net of primary and reinsurance financial structures.
- Demand Surge: increase in the cost of repair or replacement of damaged property that may occur following a large-scale disaster when many individuals and organizations vie for a limited supply of labor and materials needed for repair.
- EP (sometime LEC for loss exceedence curve): Exceedance Probability curve. A probability distribution of losses that will be sustained by an insurance company in any given year.
- AAL: Average Annual Loss (expected value). Mean loss that occurs in any given year. Mean of year losses over all simulated years.
- AEP: Aggregate (or Annual) Exceedance Probability. the AEP represents the probability of seeing total annual losses of a particular amount or greater. The loss from all events each year. Sorted year losses over all simulated years.
- OEP: Occurrence Exceedance Probability. The OEP represents the probability of seeing any single event within a defined period (typically one year) with a particular loss size or greater. The loss from the largest event each year.
- cdfs: Discrete cumulative distribution functions.
- ELT: Event Loss Table with samples mean and standard deviation for event. The catastrophe model will then run the entire event set across the portfolio, and calculate a loss from every event in the model to every policy.
- Return Period: Long term average loss greater than a given loss L in one year will occur at RP year. It represents how confident we are about potential loss. 1 in 250 year return period (1/250 = 0.4%) => 99.6% confident that loss will not exceed this value.
- TVAR: Tail Value at Risk. Shape of the curve for the most extreme events. If a given loss is exceeded, then the average severity will be TVAR.
- Standard Deviation: How far from the normal (see: https://www.mathsisfun.com/data/standard-deviation.html)
- Analytical or population statistics: The set is real.
- Sample statistics: The set to analyse is a subset of the reality.