Jump to ContentJump to Main Navigation
Acts of God and ManRuminations on Risk and Insurance$
Users without a subscription are not able to see the full content.

Michael Powers

Print publication date: 2014

Print ISBN-13: 9780231153676

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231153676.001.0001

Show Summary Details

False Choices and Black Boxes

False Choices and Black Boxes

The Costs of Limited Data

Chapter:
(p.207) 13 False Choices and Black Boxes
Source:
Acts of God and Man
Author(s):

Michael R. Powers

Publisher:
Columbia University Press
DOI:10.7312/columbia/9780231153676.003.0013

In recent decades, governments, corporations, and ordinary citizens the world over have become more aware of the potential impact of extreme-event, or catastrophe, risks. Dramatic events such as the September 11 attacks (2001), the Indian Ocean tsunami (2004), and Hurricane Katrina (2005) continue to raise these issues in the public mind while sending researchers from various disciplines scrambling to explain and forecast the frequencies and severities of such events. However, the rarity of catastrophes means that relevant data for estimating expected loss frequencies and severities is sparse, leaving risk-assessment experts with a difficult statistical problem: how to make reasonable forecasts of insured catastrophe losses based upon few historical observations. This chapter considers two troublesome issues arising from the paucity of catastrophe data: (1) a tendency to oversimplify conclusions from scientific research; and (2) the use of “black-box” forecasts that are not subject to impartial scientific examination and validation.

Keywords:   insurance, risk modeling, catastrophic events, extreme events, risk forecasting, catastrophe losses, black-box forecasts

Columbia Scholarship Online requires a subscription or purchase to access the full text of books within the service. Public users can however freely search the site and view the abstracts and keywords for each book and chapter.

Please, subscribe or login to access full text content.

If you think you should have access to this title, please contact your librarian.

To troubleshoot, please check our FAQs, and if you can't find the answer there, please contact us .