Welcome to Friday. Here is the Friday RMN Morning Brief, focused on models and the risks they are—or may not be—capturing.
Today we're looking at three places where the underlying risk is moving faster than the structures designed to measure, manage or absorb it:
- Flood: Why clustered flood catastrophes may be exposing a disconnect between the physical risk and the reinsurance and catastrophe bonds designed to absorb it.
- AI: How Anthropic’s increasingly capable models could change the odds of a catastrophic pandemic—and make the risk harder to measure.
- Physical infrastructure: Why J.P. Morgan warns that AI-driven cyber risk could collide with aging industrial systems that are difficult—or sometimes impossible—to patch.
There Is a Growing Disconnect Between Flood Risk and the Private Capital Designed to Absorb It
There is a growing mismatch between how catastrophic flood losses accumulate and how the U.S. federal government uses private capital—including catastrophe bonds—to help absorb those losses.
New research from Princeton and Columbia finds that many catastrophic flood-loss clusters can fall outside the reinsurance and catastrophe-bond structures designed to transfer some of the National Flood Insurance Program's risk to private markets.
