Speaking at the briefing on measuring risk hosted by underwriting group Kiln, Head of Exposure Management at Lloyd’s Paul Nunn said despite the advances on the sophistication of catastrophe models and their use the industry would like to see more competition.

Responding to a question over whether the panel believed that the day would come when underwriters built their own in house models Mr Nunn replied.

“I cannot see that happening. The costs of the models mean that it is too costly for the industry to finance. The modelling firms are a very useful provider of services for the industry, and while it would be nice to have more choice, the costs are a very big bar to entry.

“I am not expecting to see a major new entrant in the market in the near future.”

Paul Miller Head of catastrophe Modelling at Aon Benfield added that one of the big plus points for the modelling firms and another reason why the internal modelling solutions were not expected was the fact that the modelling firms were not linked to any underwriter and could collect broad data and present a model with no thought of individual exposures.

“Insurers place great store in the fact that there is an independence in the models and for some reason which I still cannot fathom the underwriter still view the broker driven models with some scepticism,” he added.

Kiln’s  Chief Risk Office and Actuary Andrew Hitchcox said that for all the talk of models and their accuracy they still played a more significant role for insurers and reinsurers to understand broad exposures rather than individual risks given the natural model slippage that had to be factored in.

“The question for underwriters remains just how do you get the best out of the use of catastrophe models in the underwriting process but also avoid them tripping you up,” he added.