Natural Catastrophes: Are Canadian Insurers Ready for “The Big One”?

Collaborative Research Team Project: 2021-2024

Lead by Mélina Mailhot, Professor, Department of Mathematics and Statistics, Concordia University

Insurance companies face the challenge of setting insurance premiums long before claims realise. Adequate premiums require sophisticated statistical models that incorporate all peculiarities of the covered risks. Recent years have seen tremendous improvements in statistical models for insurance risk management, both theoretical and computational. These advances, however, have not been reflected in the solvency capital requirement – the capital insurance companies are required to hold by regulation. This project aims to expand, develop, and advance the theory and application of risk assessment of insurable natural disasters, which is to a large extent still missing.

The objectives of this proposal are:

  • Advancing the field of risk assessment of insurable natural disasters, both from a theoretical and an applied point of view.
  • Developing a stress testing methodology that is executable on real data.
  • Providing policy recommendations for the calculation of solvency capital requirements for natural disasters.

The successful implementation of these research objectives will, in collaboration with the Office of the Superintendent of Financial Institutions Canada, Autorité des marchés financiers, and the Canadian Institute of Actuaries, close major existing gaps and fulfil the current demand by policymakers and risk managers for reliable tools to understand and obtain insights into the risks inherent in natural catastrophes.

Team Members

Mélina Mailhot (Concordia University) and Silvana Pesenti (University of Toronto).

Other Collaborators include Marius Hofert (University of Waterloo); Shlomit Jacobson (Canadian Institute of Actuaries); Andrei Serykh (Office of the Superintendent of Financial Institutions); and Claude La Rochelle (Autorité des Marchés Financiers).

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