"Actually I'm fascinated by catastrophe finance...".
I won't follow through on my threat but will link to the Houston Chronicle's SciGuy's take on one aspect of the intersection of climate and (big) money:
Some scientists who predicted number of storms for risk firm now question validity
Just weeks after monster storms Katrina and Rita devastated the Gulf Coast, a risk management firm flew a handful of the world's top hurricane scientists to Bermuda and its famous pink sandy beaches.
There, the scientists were asked to predict Atlantic hurricane activity for 2006 to 2010.
They estimated hurricane activity would be significantly higher than the long-term, historical average, calling for 40 percent more landfalls of major U.S. hurricanes than normal during the period.
Shortly thereafter, the firm, Risk Management Solutions, or RMS, increased its "modeled insurance losses," which help establish rates for insurers and re-insurers, by 40 percent.
Outside insurance circles, this expert elicitation process isn't well known. But it has at least indirectly affected homeowner insurance rates for many coastal customers.
Now, in addition to some insurance regulators, scientists who have participated in the process have begun questioning the method.
Some participants in the latest meeting, held in October in Miami, say there's not enough evidence available to produce a skillful forecast of five-year hurricane activity. And at least one is worried that the exercise might be used to justify increased insurance rates.
"For all I know, they believe that they can predict activity five years into the future, but the science does not support this belief," said Roger Pielke Jr., a professor of environmental studies at the University of Colorado who participated in this year's meeting. "How can this be anything other than putting a scientific imprimatur on a question that science has yet to be able to answer?"
Whether the elicitation process has the power to influence the lowering of rates, in addition to raising them, will soon be tested.
Prediction revised
During the October gathering, the scientists lowered expectations. Their revised estimate called for just 20 percent more landfalls of major hurricanes — defined as a Category 3, 4 or 5 — during the next five years than the long-term average.Historically, about two major hurricanes strike the United States every three years.
So far, RMS hasn't acted to lower its modeled losses based upon the most recent elicitation. "It is too early to conclude what impact" the new estimate will have on the 2009 models, the company said.
Several firms provide models to insurers to help them understand their financial risk from hurricanes. Traditionally, these models have estimated risk based upon the long-term average of hurricane activity.
But after the disastrous 2004 and 2005 hurricane seasons, RMS and others sought to develop what they termed "medium-term," or five-year models that reflected the greater-than-normal activity since 1995.
Because there was no consensus on how best to model hurricane activity over five years, RMS turned to scientists, said Christine Ziehmann, director of model management at RMS. "The expert elicitation approach avoids the danger of picking just one forecast model by building multiple models using historical data as well as predictions of future conditions, and gathering external expert judgment on which models are more suitable than others," she said.
By early 2006, three risk-modeling companies — RMS, AIR Worldwide and EQECAT — had released ""medium-term" models. Some of these were used by reinsurers — companies that provide insurance to insurance companies — to raise rates.
However, companies such as Allstate and State Farm, which sell homeowner policies, must go through state regulatory processes to receive higher rates....MORE
HT: SciGuy's blog, where his pull-quote is from one of the big names in hurricane research:
...Perhaps not, RMS says.
Interestingly, the news release also says this about the scientific understanding of hurricane activity in a warming world:
There is now much greater consensus among hurricane scientists on the impact of increased global sea surface temperatures (SSTs) on Atlantic hurricane activity.
Let me tell you the scientists who participated in the "expert elicitation" were shocked by that statement. Here's what Judith Curry, a Georgia Tech atmospheric scientist who believes climate change is making Atlantic hurricanes stronger, told me about that statement:
"Absolutely not. The understanding of sea surface temperature influence on hurricane activity is maturing quite a bit. But how could they conclude that from the diverse group of people at their gathering? It's just an unwarranted conclusion from their elicitation process."
See also our July '08 post "HURRICANE WATCH: Insurers Criticized For New Rate Models":
We have links to some of our global warming/insurance posts below. Also, a 'search blog' for Warren Buffett will pull up some posts on the topic.......May 9, '08-"Shop for Property/Casualty Insurance Savings NOW! Then Short Their Stocks With the Savings"
Lloyd's warns of a lack of natural disasters
Allstate blames global warming for rate hike
The Climate Change Peril That Insurers See
lots of links
Katrina devastation not unrivaled, analysis finds
Galveston poised to defy geologists
Stupid, stupid, stupid
