Most insurance companies manage catastrophe risk at the 1 in 100 and 1 in 250 year return period losses. The catastrophe models produce estimates of these numbers by randomly generating events using simulation techniques and applying numerous assumptions on the frequency and severity of events by region.
Characteristic Events (CEs) provide you with estimates of losses more directly. Using the same scientific data underlying the catastrophe models, the CE intensity "footprints" are created to represent the type of event that is characteristic of the selected return period in each region. The fully transparent footprints are superimposed on your company’s exposures, and damage functions by occupancy and construction are applied to estimate the losses.