A Decision-Theoretic Tool for Enhanced Cat Risk Management

Making insurance decisions considering hazard uncertainty and the decision-maker's attitude to risk

Tom and Valentina have been working with Reask and the London School of Economics to develop decision frameworks that allow for multi-model views of risk to be utilised efficiently and directly in subjective decision making processes. We will also develop an online tool which will allow uncertainty to be communicated effectively and to tailor the methods to users’ circumstances and attitudes to uncertainty. 

The framework will attach to business-specific end-points, for which there are currently no tools available to the industry. One challenge we propose to tackle is: “How to quantify and communicate uncertainty in hurricane risk pricing during an evolving Atlantic Hurricane season, and subsequently how to justify writing or purchasing reinsurance backup covers for this peril.”