Karen Clark warns catastrophe models can be stale within two years

Karen Clark, founder and chief executive of Karen Clark & Company, told delegates at ILS Bermuda Convergence 2026 that catastrophe models can be obsolete within two years, according to the Royal Gazette Bermuda Re, which reported her remarks on October 14. "If your models are even two, three years old, particularly for the atmospheric peril models, you're already behind the trends," she said.

For US perils, Clark said exposure growth has been a larger driver of rising losses than climate change. Homebuilding costs have nearly doubled in a decade, she said, and buyers are building larger houses. She put construction cost inflation at roughly twice the rate of the consumer price index, and said the supply shortages that followed Covid "really haven't gone away." Climate change is affecting hurricanes and wildfires, she added, but its contribution to losses so far is relatively small next to exposure growth.

Clark attributed the perception that severe convective storms are rising faster than other perils to model error rather than a change in the hazard. The first generation of models "were drastically underestimating the risk," she said, and updates have not settled the question; every revision has brought a large increase in modelled losses. In her account, all perils are rising at broadly similar rates because of exposure growth, with hurricane risk perhaps a little faster as people keep moving toward the coast.