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Climate-Enabled Catastrophe (CAT) Loss Models

Natural catastrophe (CAT) loss models are decision support systems used extensively within (re)insurance to assist in pricing natural hazard risk and aggregate exposure management. These are complex, probabilistic models that comprise a hazard, vulnerability and financial module to calculate $ losses on a portfolio of physical assets.

Figure 1. CAT models comprise a hazard, exposure and vulnerability module to model the financial risk of extreme climate (or seismic) hazards. The output is a set of exceedance probability (EP) curves. EP curves describe the expected losses on a portfolio of physical assets at a range of probability intervals for different climate hazards. ARI = Average Recurrence Interval. Y-axis is estimated losses in AUD. The integral of the curve is the Average Annual Loss (AAL). Shaded areas represent uncertainty related to natural climate variability and model error.

Three decades of development, now climate-enabled

Since 1994, Risk Frontiers has been developing best-in-class CAT models for the global (re)insurance industry, for all the major loss-producing perils in Australia – Flood, Fire, Cyclone, Hail and Earthquake.

Figure 2. Risk Frontiers’ suite of natural catastrophe (CAT) loss models. Ticks show those models that are climate-enabled.

Since 2019, our extreme weather CAT models (Flood, Fire, Hail and Cyclone) are ‘climate-enabled’. This means we can undertake detailed financial loss modelling at the address level for present day (baseline) and a range of future climate scenarios.

Our CAT models have played a crucial role in helping clients across banking, financial services, government, energy and telecommunications understand the materiality of physical climate risk to their business.

Figure 3. Change in the Average Annual Loss (AAL), from present day to 2050 under a high-emissions scenario, on a portfolio of Australian-based assets. Data are aggregated to the postcode level for anonymity but are calculated at the asset level.

Why use CAT models to measure climate risk?

The Geneva Association, and the UK, French and Australian Prudential Regulation Authorities have all identified CAT models as a critical tool to help improve the understanding of financial impacts of physical climate risk.

CAT models have two major advantages over the metric-based climate risk approach – they have been dealing with the ‘problem’ of measuring the financial impacts of extreme weather (tail risk) for several decades, and they include asset vulnerability and exposure aspects into estimates of financial loss.

Experts in climate risk

Our staff are experts in climate risk. We are long-term partners of the Australian Research Council Centre of Excellence for Climate Extremes (CLEX) and contributors to the Climate Measurement Standards Initiative (CMSI).

Read more of our insights and publications on climate risk.


Our CAT models can be executed on our side as part of a physical climate risk assessment or licenced through our Multi-Peril Workbench software. For more information, contact:

Ryan Crompton – email
Thomas Mortlock – email