Simulation of the highest insured catastrophe losses using quantile function

Abstract

Catastrophe modelling and simulations are risk management tools using computer technology to help insurers, reinsurers and risk managers better assess the potential losses caused by natural and man-made catastrophes. This article aims to present methods for modelling and simulation of extreme insured losses using quantile function based on data caused the world natural catastrophes in time period 1970-2014, published in Swiss Re Sigma No2/2015. Our interest focuses particularly on the extreme observations in the upper tail of loss distributions. We have shown that it is possible to simulate the losses in upper tail of distribution without simulating the central values. This advantage will be used for simulation a few values of the highest insured losses in the world's natural catastrophes in the future.