Virtually all catastrophe models are based on three fundamental components: hazard, vulnerability and financial impact. The hazard component describes the full range of risk by incorporating information on thousands of possible events simulated by extrapolating data from historical observations, according to Guy Carpenter colleagues Narathip Sutchiewcharn, Senior Vice President and Claudio Saffioti, Catastrophe Model Developer. The vulnerability component accounts for the physical damage caused by each event on structures, their contents and business operations. The financial component calculates the monetary losses accrued from physical damage and business interruption, incorporating information on the insurance and reinsurance conditions on the affected assets.