Havn’t read the paper in detail yet, but the authors’ understanding of the property catastrophe market is rather simplistic. I’ve traded this risk as an investo

Havn’t read the paper in detail yet, but the authors’ understanding of the property catastrophe market is rather simplistic. I’ve traded this risk as an investor for fifteen years and have used the risk models that are used by all firms in the market. Yes, there are a handful of cat risk model vendors, but their numbers are not constrained by the need for certification. The fact is these risk models are quite sophisticated and all make use of pretty much all the science, engineering and data available with respect to the hazards in question. They still are limited in their ability to accurately estimate risk and this is taken into account when pricing transactions. Furthermore, while all firms have access to the same models, many (who employ scientists and engineers) will apply tweaks based on their evaluation of model weaknesses/limitations. Hence, there is an inherent level of diversification in terms of how the models are used to price risk. This is what makes a market. The objective of catastrophe risk modeling is to estimate, long-term risk as accurately as possible, while knowing full well that there remains a lot of uncertainty. The regulators, rating agencies and other market watchers are actually ill-equipped to assess catastrophe model risk.