David Simmons notes that catastrophe insurance has traditionally focused on property loss but its scope is wider, such as disaster response. Existing catastrophe risk models do not account for second- and higher-order effects of critical infrastructure failures. Network analysis can help model how failures may diffuse through interconnected systems. Even with perfect models, risks may remain if key infrastructure components lie outside a country's borders.

2. MAYFAIR RESEARCH ASSOCIATES 2

3. MAIN POINTS
• David Simmons: «Historically catastrophe insurance has focussed on property
loss, but the scope is far wider, e.g. disaster response»
• Modelling catastrophe risks is part of a wider problem – the correct accounting of
economic risks that a country, a region or a city faces
• For many countries in the region in question we do not still have a reliable risk
model
• Existing modelling do not take into account second- (and higher) order effects
when assessing risks, and probable maximum loss
• Second-order effects depend on critical infrastructure (CI) and its importance for
impact diffusion pathway
• Network analysis helps to model that
• Even if we have a perfect model – what if central points in CI lie beyond country
borders?
MAYFAIR RESEARCH ASSOCIATES 3

4. MAYFAIR RESEARCH ASSOCIATES 4
Second order effects: Oh et al (2010)

5. MAYFAIR RESEARCH ASSOCIATES 5
Higher order effects: Kadri et al (2014)

6. MAYFAIR RESEARCH ASSOCIATES 6
Critical infrastructure and EVD spread: Fang et al (2016)

7. MAYFAIR RESEARCH ASSOCIATES 7
Centrality in network analysis: Tapiocozzo (2015)

8. MAYFAIR RESEARCH ASSOCIATES 8
Central points in CI may be located beyond country borders

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