Risk Modeling in the Insurance Industry

The ability to respond swiftly and effectively to a major incident caused by realisation of risks which can be influenced by factors that might come from almost all fields of insurance and reinsurance business, presents condicio sine qua non of insurance and reinsurance companies' survival and profitable continuity of business. Having that in mind and within the context of capital adequacy and imposed constraints of risk interconnectedness, the aim of our research has been to identify potential benefits and weaknesses of risk modeling. We conclude that overreliance on risk modeling is not desirable, due to particular limitations of models. They can be powerful risk management tool only if their results are combined with expert estimates.