Bermudian reinsurer RenaissanceRe is working with catastrophe modelling firm AIR Worldwide in a joint effort to enhance the insurance industry’s modelling of long-tail casualty risk.

“Since our inception, RenaissanceRe has been at the forefront of applying science, engineering, and data to inform our independent view of risk,” said Ian Branagan, senior vice-president and group chief risk officer at RenaissanceRe.

“Incorporating third-party expertise from proven leaders such as AIR, wherever appropriate, is a key part of this process. We’re pleased to work with AIR to advance our industry’s ability to better understand how to model and manage casualty and specialty risk.”

As part of the collaboration, AIR is producing portfolio-specific casualty losses based on its innovative exposure management application, Arium. Arium’s scenario-based loss assessment framework enables companies to systematically measure portfolio loss potential and exposures to simulated scenarios representing both emerging risks and forward-projected historical events. AIR and RenaissanceRe will work closely to further refine what they claim to be the industry’s first fully probabilistic model for extreme liability events.

“We’re currently developing the industry’s most comprehensive model of liability risk to help companies understand the complex interconnections in their portfolios, resulting in a comprehensive assessment of potential future losses,” Jay Guin, chief research officer, AIR Worldwide, said.

Dr Guin added: “Collaborating with a global leader in risk management like RenaissanceRe is a great step forward in the development of our stochastic model. This model provides a forward-looking view of risk and will enable insurers and reinsurers to capture the full distribution of the frequency and severity of casualty catastrophes.”