Comments on: Are We Seeing the End of Hurricane Insurability?

By: Rabett

Rabett — Tue, 18 Apr 2006 04:40:26 +0000

The problem is not that the risks are increasing, it is that the industry cannot figure out how to evaluate the risks, e.g. they are not sure of the scientific basis, and in the absence of that they cannot price their insurance appropriately. See the comments by Buffet. The set to between the Grays and the Trenberths is a strong caution flag for them.

The insurance industry will write large policies on large risks, but only for appropriate premiums. If they have not a clue about the risks or have reasons to suspect that there is a problem with their models they will not write, or will price themselves out of the market.

In that sense an unknown risk is uninsurable (you could, of course find a bookie or go to Lloyds), and as a result the consumer will not be able to purchase insurance. There are cases where the risk is insurable, but companies will not write policies. For example if they cannot charge what they think they need for a return for regulatory or market reasons).

By: James Annan

James Annan — Tue, 18 Apr 2006 03:00:57 +0000

Roger,

The dictionary definition which you provided explicitly supports what I said – “the end of hurricane insurability” is hyperbole. But enough of that for now.

As I understand it, your deeper point is that an explicit acknowledgement of (poorly-understood) climate change implies that expert judgement as to future changes forms a larger part of risk analysis, and historical data on past events a lesser part, than was heretofore the case.

To which I say…sure, but what’s the big deal about that? Lots of insurance risks have always involved a certain amount of judgement – indeed it would be straightforward to argue that the existing CAT models are already a blend of expert judgement and data. There may be a shift in the balance underway, but there’s no paradigm shift here IMO.

By: Roger Pielke Jr.

Roger Pielke Jr. — Mon, 17 Apr 2006 23:06:48 +0000

Greg- Thanks for your comments. Yes, obviously the headline is confusing for some readers! For me this is a good lesson in comunicating on issues that have some terms of art involved. However, a bit disappointing to me was James’ unwillingness to recognize that there is in fact a deeper issue involved here, initial confusion aside, rather than some bad faith on my part. For what it is worth folks I’ve heard from in the industry have expressed no such confusion. For me the lesson is to be sure to explain the notion of “insurability” and its significance when seeking to discuss this issue among a general audience. Thanks!

By: Dano

Dano — Mon, 17 Apr 2006 22:27:45 +0000

Eli:

Good link.

You’ll know when the obfuscation and mendacicization are over for good when Hi and Lois comment about AGW, HockeyStick bamboozle sites or FEMA management incompetence. Until Lois looks concerned, we can only nod our heads knowingly at Dagwood’s exclamation mark over his cowlick.

Oh, and what Mr Lewis said.

By: Greg Lewis

Greg Lewis — Mon, 17 Apr 2006 21:57:34 +0000

Roger,
Have to agree with James on this. Your headline is confusing and prone to misinterpretation. Why not just admit what you wrote was confusing. I misinterpreted it at first. I may be stupider than I think, but you writing is less clear then you think.

By: Rabett

Rabett — Mon, 17 Apr 2006 21:32:53 +0000

Apologies, the url is only valid for 4/17. The permanent home of the strip is http://tinyurl.com/myc3s . A

By: Rabett

Rabett — Mon, 17 Apr 2006 21:30:51 +0000

Blonide has the final word….

http://www.blondie.com/dailies/index.asp

By: Roger Pielke, Jr.

Roger Pielke, Jr. — Mon, 17 Apr 2006 14:32:40 +0000

Harold- Thanks for your comments which add a valuable perspective to this issue. (I was invited to the same extremes meeting but had a conflict.) It seems to me that this context that you share suggests some arbitrariness to the process in which the very major changes in risk estimates were developed that will certainly reverberate through this global community.

Another factor worth considering, which would certainly be raised in other contexts like energy or drug testing, is that most (if not all) of the participants in the expert elicitation have received funding from insurance/reinsurnace companies. I’ll underscore that each is a widely-respected scientists, nontheless, financial ties to industry can create a perception of too close a linkage.

By: Roger Pielke Jr.

Roger Pielke Jr. — Mon, 17 Apr 2006 00:23:25 +0000

Benny- Thanks for your comments. I have far more worries about the state of the catastrophe modeling firms than I do about their clients in insurance or reinsurance. I hope to soon post a review/comment of a recent report about the health of the reinsurance industry, and it is quite strong in many respects.

By: Roger Pielke Jr.

Roger Pielke Jr. — Mon, 17 Apr 2006 00:19:12 +0000

James- I will simply restate that I am perfectly comfortable with the headline and the text of my post. The notion of “insurabiltiy” and “insurance” are viewed by the insurance and reinsurance industries as distinct concepts. I am sure that you might find some fault if someone were to define to you “climate sesitivity” to mean the “emotional state of the climate,” based on what they found at dictionary.com;-) Enough of this silliness for me, go ahead and have the last word if you’d like. Thanks.