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New Directions in Catastrophe Risk Models


Sponsors: Thematic Group on Poverty Impact Analysis, Monitoring and Evaluation; and Global Facility for Disaster Reduction and Recovery

Presenter: Richard Murnane, Baseline Management Company, Inc., and Bermuda Institute of Ocean Sciences
                                                            
When: October 9, 12:30 - 2:00pm

Catastrophe (cat) risk models are nearly indispensable tools in the property catastrophe risk industry. As a result, most catastrophe risk models are designed to provide the user with estimates of insured loss on an annual basis. The capital markets' interest in cat models is growing because of the continuing efforts to securitize catastrophe risk. Models are available for a wide range of hazard including hurricanes and typhoons, earthquakes, tornadoes, wind storms, flood, wildfires, and hail. The geographic coverage of the models is expanding but they tend to be produced for regions with significant insurance markets. To the consternation of almost all users, the models are proprietary and considered to be "black boxes". As a result, there are a number of existing efforts to develop all or part of an open source catastrophe risk model. These efforts will likely fail to reach the point where they will be widely used by the insurance and capital markets because they will have difficulty getting access to insured loss data. However, open models would have a variety of benefits for users outside of the insurance and capital markets.

The presenter will provide an overview of ongoing efforts in the development of proprietary and open source cat models and give examples of how risk models could be developed for novel applications such as assessing potential climate-change related impacts associated with sea level rise, or for cost-benefit analysis related to climate change mitigation and adaptation.

Richard Murnane is the Senior Vice President at Baseline Management Company, and a Senior Research Scientist and Program Manager for the Risk Prediction Initiative, a science-business partnership based at the Bermuda Institute of Ocean Sciences.


Presentation

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