CATASTROPHE MODEL STRUCTURE A catastrophe model that can be used in modelling insurance losses includes all the primary elements mentioned above. It starts with generating a natural catastrophe event such as a hurricane or an earthquake, then determines its physical characteristics at the locations where insured properties are situated, and finally determines the degree of damage caused to the properties and the total financial loss to the insurance companies. The model effectively simulates many (sometimes as high as a million or even more) hypothetical years and accumulates the loss statistics over these hypothetical years. The large number of simulations is essential when dealing with very rare events. The basic structure of the catastrophe models has been described in this and the previous chapter. Figure 4.16 shows a structure of a catastrophe model that is designed specifically for the hurricane hazard; it also shows some of the parameters that are generated by the model in inter