In detail
- Fathom trained a diffusion model on ~1,000 years of climate simulations and generates scenarios for 2030; a second model refines resolution from 100×100 km to 10×10 km.
- Verisk models extreme wind and rain together instead of separately—capturing spatial variability more precisely than traditional machine learning.
- Risk: models can hallucinate plausible-looking but physically impossible events—a critical problem when assessing risk for billion-dollar damages.
Why it matters
For insurers and financial services, this is a turning point—AI can revolutionize tail-risk modeling, but only if hallucinations are controlled. This creates new demands for validation and governance.
For you If you work in insurance, financial services, or risk management, explore how you could use generative AI for scenario modeling—but build robust validation processes first.