Insurance
Home›Insurance›Reinsurance›AI could expand catastrophe bond coverage, including d…
AI could expand catastrophe bond coverage, including data center risks
Brookmont’s Ethan Powell said AI is improving speed and accuracy for summarizing risks and insured damages, boosting transparency for portfolios and investors.
Artificial intelligence is increasingly being adopted across the insurance-linked securities, or ILS, and catastrophe bond markets, with potential to broaden coverage into new risk areas such as data centre exposures, according to Ethan Powell, principal and CIO of Brookmont Capital Management.
Powell said AI advancements over the past year are improving the speed and accuracy of generating transparency around individual cat bond deals and entire portfolios, which supports more contemporaneous communication on potential performance implications for pending perils.
He added that AI use in catastrophe models is helping refine deal structures and terms by allowing quicker evaluation of risk return profiles across varying contract features such as trigger, attachment, and exhaustion points.
Powell also noted that while AI has shown good predictive capability for tail risk, there is still room for improvement in predicting true trail risk and event risk.