Friday, December 9, 2011

A Tired Tale

For several years now, the EU has been battling with a simple decision, "Should sex be used as a predictive factor for pricing insurance products?"  The decision is a yes/no situation.  On the yes side is the insurance industry, claiming that the use of the sex parameter allows for more accurate pricing of contracts with lower risk groups paying less and higher risk groups paying more.  On the no, is those that argue that such a practice is against the EU's value of social equality.  

Financial interests have sought to make the debate about science, indicating that the quantitative difference in risk between men and women demands that the sex parameter must be used. Some, like the Mark Hoban, British Financial Secretary to the Treasury, have gone so far as to argue that because of this, the financial sector should be exempt from adhering to widespread social values and laws,
While nobody should ever be treated unfairly because of their gender, financial services providers should be allowed to make sensible decisions based on sound analysis of risk.
This particular framing of the debate is inaccurate, as the issue is not about whether or not their is a difference between the sexes but whether or not that calculated difference is just in decision making about insurance product prices.

Earlier this year the European Court of Justice decided that the answer is NO, due to values of equality.  The outcome of this, is thought to be a redistribution of costs and benefits among the two genders.  In typical insurer fashion, industry representatives have retorted with their standard myth
The core principles of risk assessment is that people in comparable situations are treated equally and those in different situations are treated differently.  If this risk-based, factual principle is not maintained, premiums will increase, coverage will decrease and some products will be withdrawn from the market.  
Many seem to allude that the result of this decision will be an aggregate increase in premiums.  That is, the total premiums collected (men +women) will increase.  Althought overall losses have not increased nor should they increase, at least not by much.  If losses are not increasing, than any increase in aggregate premium is based only on insurer's perceived risk or maybe perceived uncertainty.  The decision as to whether or not to accept insurers' perceived risk assessment can and should be open to political and moral debate.

Thursday, December 8, 2011


In literature and drama, a catastrophe marks the death or destruction of the story's protagonist.  This is key in understanding the symbolism of 'catastrophe'  in political and popular rhetoric.  Evoking the term frames a person or entity that is champion of a cause, a struggle to pursue a moral good, and an adversary impinging upon the ability the moral good to be satisfied.  Those who are placed in these roles change depending on who is using the term 'catastrophe' and to what end.       

There is claimed to be a unique concern in natural disasters because a single event can damage multiple properties causing a substantially large aggregate loss.  Such losses, some believe“have had a more devastating impact on insurers since 1990 than in the entire history of insurance.”  Events causing losses of $25 million or more are termed ‘catastrophic’ and an especially large aggregate loss may be deemed ‘mega-catastrophic.’ While the concept is not new, as losses have grown catastrophes have emerged as a new type of risk for which the insurance industry has a heightened sensitivity. Catastrophic risk has the potential for systemic market effects because of the many financial contracts that exist to cover the losses.    

What is significant about this is that ‘catastrophe,’ used in this way, is not a risk of the private property owner or of humanitarian concerns, but one of insurance industry finances.

Social Science
The term catastrophe is used in political rhetoric to appeal to varying notions of risk about the term.  Above, it is shown that insurers have a very specific quantitative meaning of the term.  Social science uses the term regarding noneconomic risks of disasters.  For instance, during their annual conference in 2009 the sociologically focused Natural Hazards Center ran a panel discussion titled, “Catastrophic Events: More than Just Big Disasters” with the following description,
The magnitude of damage, the destruction of vital resources, and the massive number of displaced victims after a catastrophic event pose extraordinary challenges for disaster response and long-term recovery.  
Catastrophic events place tremendous burdens on all agencies—local, state, and federal—and require a different approach to planning and preparedness than run-of-the-mill disasters. This session will discuss the differences and similarities in planning for large-scale catastrophes versus day-to-day (or year-to-year) disasters.

Public Decision Makers
The many concerns associated with catastrophe are compounded under the auspices of the ‘homeowners insurance crisis’ and used to gain political support for particular policy.  For example, Florida Congressional Representative Tim Mahoney in support of H.R. 3355, the Homeowners Defense Act, framed the problem as a “national catastrophe insurance crisis” (Subcommittee on Oversight and Investigations 2008).

Thursday, December 1, 2011

Uncorrelated with Disasters?

There seems to be a common claim that natural disaster events are uncorrelated with other market events.  I did some poking around and it seems that some have also been skeptical about this.

Here are my initial thoughts as to why I am wary of the claim...
  • Miami Hurricane of 1926
    • Is thought to have ended the waning Florida land boom of the 1920s.  
  • Hurricane Andrew in 1992
    • A bunch of insurance insolvencies and reinsurance took a significant hit
    • Difficulty in expanding subprime mortgage lending in Florida 
    • Some research indicates that even where Andrew did not cause damage, property values fell
  • Hurricane Katrina and Wilma of 2005
    • There was a gas shortage in the southeastern states and the price of that gas shot up.  
    • Industry and jobs were trampled in LA and MS
    • Inability to make mortgage payments resulting in a moratorium on foreclosures of FHA backed mortgages
  • Japan Earthquake 2011
    • I remember watching the market do all sorts of things after the earthquake, if I remember correctly the yen lost a lot of value quickly
  • In any predicted event, there seems to be a lot that goes on in the financial markets prior to the actual event and then again after some assessment. 
So, I think to claim that there isn't a correlation is bizarre.  But, the reactions seem different depending on the event's place, type and magnitude.

Here is a nice correlation reported by the FT.
The flooding in Thailand is expected to inflate insurance claims already made against the earthquake in Japan this year because of the disruption to carmakers and other producers that were taking the impact of lost Japanese production.

Wednesday, November 30, 2011

Perceptions of Modeling Risk

Graph from a Merrill Lynch/Benfield presentation about catastrophe bonds from 2006.

Models are often referred to as 'black boxes.'  Their coding is as secret and highly guarded as Coca-Cola's recipe. Few have any idea what actually goes into creating any given model and they are often legally sworn to secrecy.  According to the graph above, this exposes investors in a catastrophe bond to moral hazard risk.  Further, if a bond is triggered only by measurements of the physical peril, then investor's moral hazard risk is reduced, but the actual versus estimated risk is greater for the issuer.  That is to say, one could be on the hook for a great deal more losses then will be reimbursed by the investment scheme.

Look at the way parametric index and pure parametric is situated.  The parametric index exposes the investor to greater moral hazard than pure parametric.  The difference between the two is that the index requires some calculation, formulation, math... well, modeling essentially. The latter does not.   

Also in the report was the following table: 
For each trigger, the means of mitigating risk is suggested to be evaluation of modeled losses to historical events.     

So, what can be gleaned from this....  
1) There is moral hazard risk associated with modeling, such that, those with control over the models control the risk that others are exposed to. 

2)  The farther removed one gets from actual loss triggering actual payout the greater the risk for entity responsible for the loss.  For instance, say your roof gets torn off in a Cat 3 but payout is not triggered unless your exact location is measured to have experienced winds at Cat 4... that would be a significant bummer.  Likewise, imagine your insurer gets flooded with damage claims but their reinsurance contract doesn't payout because winds were not high enough.  There arises some solvency concerns...

3) There appears to be a need to evaluate the models against the historical record :-P

4) On the bright side, if the models or prior agreed upon parameter dictates that you are to get paid, it will be quicker if no one has to come and look at your  house/crop/etc and you will not need to shmooze your insurance adjuster. 

Wednesday, November 23, 2011

"All Ways are My Ways!"

This past Sunday, Paul Krugman had an op-ed piece distinguishing between technocrats and ideologically driven "impractical romantics."
 They are, to be sure, a peculiarly boring breed of romantic, speaking in turgid prose rather than poetry. And the things they demand on behalf of their romantic visions are often cruel, involving huge sacrifices from ordinary workers and families. But the fact remains that those visions are driven by dreams about the way things should be rather than by a cool assessment of the way things really are.
How timely then, that a new round of emails from the University of East Anglia have  flooded the internet.  Depending on who you role with, the way the emails are sorted and searched varies.  But, there is something there for everyone.

For me, there is climate change and insurance.

What may not be incredibly obvious is that the IPCC and the insurance (and banking) industry are chummy.  Both work through the UNEP.  The IPCC defines and characterized the climate risk and the UNEP-Financial Initiative commodifies it.  It's been going on for awhile and is now quite a big business.  As I was in the midst of teenage angst when the groups "joined forces" (a term on the the UNEP website, at least at one point) and sought to establish a financial market around climate change, I'm a bit late on the bandwagon.  Nonetheless, from what I can tell, the relationship presents significant problems.

First and foremost, evolution of scientific understanding is linked to and constrained by financial markets.  The opinion that the IPCC has of the state of the science effects the risks available to the insurance industry.  So, for example the IPCC cannot become of the opinion that climate change is not affecting disaster losses. If it does, the market tanks. No worries though, because there are plenty of impractical romantics high up on the IPCC list that are all too happy to "redefine what the peer-review literature is!"   I will take a guess that this relationship is in part why the wording about floods and hurricanes changed from the draft of the summary to the final summary.  In the draft, it was suggested that there was no link between damages and climate change.  In the final, it suggested that while no link is evident it need not suggest that one does not exist.

Beyond mere financial interests it appears that those who speak on behalf of the insurance industry and our our abilities to adapt to climate change risks have personal political agendas as well. For instance, a review editor of the part of the SREX report has a clear professional goal to rid the world of alternative views, would be good to show the sceptics up in the naked daylight for the charlatans they are!
...I want to do my bit in sweeping the sceptics out of insurance (as far as possible!)   

Sunday, November 20, 2011

What's 'In' and 'Out' in Climate Related Disasters?

Much like a fashionista's excitement for a debut of a designer's latest line, the world's climate intellectuals have waited with bated breath for the IPCC's latest review of disasters and climate change released this past Friday.

The blogs went wild, as everyone weighed in on the IPCC's qualitative judgment of science's array of argumentative points supporting and negating links (in both type and magnitude) between weather disasters, climate change and social effects.  There is much that can be said in the successes and failures of their judgment calls and the wording of their official summary that still looks like a draft (The final report is out in February.)  Such comments have been eloquently summed up with the workday's highlights here.  That the blogs buzzed in such a way with discussions of right and wrong indicates something else too... the important role the IPCC plays as purveyor of what is 'in' and 'out' in moral claims about climate change and its scientists.  

In the past, those that have discredited assessments/judgments made by the IPCC have faced great wrath from those that have sought to quell any disagreement with the entity's authoritative word in interpreting climate science.  The behavior is characteristic of any moral panic worth its salt.   In effect, the arguments the IPCC made were "in" and arguments against them or questioning them were not only out of fashion but amoral.  On Friday, the IPCC revealed a new interpretation of scientific truth.  This has changed not only what is in and out, moral and amoral, but who falls into these categories.  In an instant, the persecutors became the folk devils and now we all wear a scarlet letter.

Tuesday, November 15, 2011

Occupied by a Loss of Trust

World Map of Occupy Protests from

I have noted some things about the Occupy protests...

The protests have been largely poo-pooed, regarded as an amorphous social phenomena and a logistical nightmare for municipalities to manage.  Worse, some have framed them as problems due to specific individuals or companies.  But it should act  far more as an indicator of a widespread distrust in the governing systems that rely heavily on the maintenance of that trust for power to govern.  Trust and risk are inversely related.  As trust decreases, perceived risk increases.  That the governing systems seem to be perceived as a risk to the public well-being should be a concern to those powers as it is an indication that the public has lost trust in their ability to govern effectively. 

Also, a common complaint about the protesters is that their demands seem unorganized.  It appears more of an uprising with general discontent then one of traditional demand for specific policy action.  But it is not fair to ridicule protesters for this.  Because the public does not know the intricacies of the system and cannot know the intricacies, they trust others to make decisions about the system for them.  This is the purpose of electing officials that consult with technical experts.  To accuse them of not formulating specific policy demands is a slap in the face to those that have put their faith, debt, and dollars into the ideals of democracy and by extension, modern capitalism.  

A brief editorial by Richard Lambert in the Financial Times reflected on this issue well
...The fact that the protesters have no clear agenda is irrelevant. They represent concerns that many people can relate to, and they are unlikely to go away.
So it may be that capitalism is approaching some kind of tipping point, away from the winner takes all culture of the past three decades. If left unchecked, public disquiet will sooner or later bring a political response, maybe in the form of much more aggressive regulations and progressive tax systems. These could be at least as damaging as the free market fundamentalism that they would seek to replace.
Much better for business itself to recognise that it has a real economic interest in the well-being of the societies in which it operates; that success or failure is not just determined by earnings per share or profits per partner; and that a successful market economy has to be built on a degree of trust and mutual respect. Capitalism has adapted to changing political and social pressures in the past, and now is time for it to do so again.

Wednesday, November 9, 2011

"But I'll take your bet, your gonna regret, 'cause I'm the best that's ever been."

I have some obscure "hobbies."  For example, I like to guess what sorts of feelings and responses advertisements try to fetch.  When I can't make any sort of conclusion, I suppose that I am not the target audience.  I get really excited when I meet someone that admits an affinity or dislike for a particular commercial because I think it tells me something about that person.  Indeed, commercials are one of my favorite topics.

In line with the above, I like to make note of job postings sent out by an academic department to their student listserves.  These are regulated and often have a one or a handful of gatekeepers.  So, I tend to assume that whatever goes out on the listserve is symbolic of the direction that the department hopes their students go.  It is symbolic of the ideals supported by the department.    

In 2005, I proudly graduated from the Climate and Society program.  The cost of doing so was debt accrued in 1 year that amounted to ~50% of the cost of attending a Texas state institution for 4.5 years.  Benefits were also substantial: I met some awesome people, saw some cool things, and garnered a healthy skepticism of climate science, the UN, economists, and anything "Ivy League."

It should be noted that the Climate and Society graduate program is the baby of the IRI at Columbia.  Being in the program, I got the feeling that the intent was to rapidly teach many individuals how to use the climate forecasts so they could go forth and do just that.  Slap a Columbia certification on 'em and you got yourself someone with legitimacy. 

Anyways, long story short, I'm on their listserve.

Several moons ago, I got an email from the Climate and Society graduate program listserve advertising a job that was forwarded by one of the program's graduates.   The job was for a "Manager, Insurance Program" with Ceres.  An excerpt,

The insurance industry performs two distinct roles in the global economy—risk management and investment—making it both subject to the impacts of climate change and an essential driver of climate action.  As risk experts, insurers have special credibility in delivering messages—via the media and directly to the companies and individuals they insure—that affirm the reality and impact of climate change.  Insurers also are some of the largest investors in the world, controlling more than $23 trillion in global investments. US insurers hold more than a quarter of this total, making them a critical source of capital for the global economy to transition toward a low-carbon future.  Ceres is the only sustainability NGO with deep expertise on the insurance industry...
(Bold mine)

Description & Responsibilities

Ceres is looking to hire a manager focused on the insurance sector... The manager position offers a unique opportunity to move a key sector of the economy toward action on this century’s most pressing environmental issue... Specific duties include, but are not limited to the following:
·     ...engaging with a range of insurance industry actors, including large insurance and reinsurance companies, insurance regulators, catastrophe modelers, and climate scientists on climate change and insured losses.
·       Effectively communicating to a broad range of actors, including the broader financial community, equity analysts and bond rating agencies, about the risks that climate change poses for insurers.
·       Writing research reports and other multi-media communications to reach companies and stakeholder groups with timely information on Ceres’ industry programs and sustainability issues...
So it is interesting to me to see the ways the program seeks to have climate information used.  That C&S has suggested that its graduates go into insurance, backs the IRI's involvement in insurance, generally and edges the program and its sponsoring research group towards a position of policy advocacy... or maybe puts them squarely in such a place.

Columbia has close ties to the UN, which also backs the insurance to address climate change issue.  Maybe it is ultimately just towing the company line, as the UN is all about the carbon market and the insurance that can stabilize its existence.

I remember the first day of class.  It was also the first day of the program!  A well known, brilliant climate scientists asked us something like, "Do scientists have an ethical obligation to society?"  It wasn't until many years later, and more debt :-), did I realize the true depth of this loaded question.

Wednesday, November 2, 2011

Eat the Rich

Prior to starting a grad school I had a bona fide job. The one charged as head of the company was a a savvy politician but also of the grandfatherly type. A good man that I learned much from in a short period of time. Replying to my general personality of skepticism, he told me, "You are too young to be so cynical." Maybe, but it has boded well for my graduate studies.

The Financial Times has picked up the Oxfam-Swiss Re collaboration (mentioned in the past, here). The article reports (written by an academic at UNC-CH) that the collaborators are creating a "work-for-insurance" plan.
Insurance companies and non-profits would link up to use this market-based solution to help poor African farmers mitigate the effects of drought. It would also have the potential to create new insurance and risk-management markets.
The program seeks to be modeled after a government "food-for-work" program.
In 2008 Oxfam and Swiss Re adapted Harita, a livelihood development plan that packages crop insurance with access to credit, savings schemes and advice on crop yields. It has since evolved into a “rural resilience” package, now called R4. Oxfam and Swiss Re gave local insurers and partners the confidence to adapt the food-for-work schemes to make crop insurance available in a similar way for the first time.

The key to offering crop insurance to very poor people is to keep costs down, and index insurance – which pays out all policyholders when factors related to crop failure occur – is less expensive than verifying farm-by-farm claims. Oxfam, Swiss Re and partners designed such a scheme based on rainfall data. Oxfam uses satellite information, while farmers also have cylinders on sticks to measure rainfall themselves. If rain fails to reach certain levels, the policy pays out.
It also integrates insurance with risk reduction because the work farmers do for the insurance relates to outcomes, such as digging ditches or cleaning seeds.
Swiss Re’s pledge of continuing support suggests to stakeholders a sincere attempt to build a new market with long-term, market-based solutions.
Although it is early days, the scheme indicates a new way to make profits while also making a difference.
1) Sounds a little like indentured servitude.

2) Work for food, offers food (I guess). What makes matters different from work-for-food, is that there is no food. Does payout guarantee food will be available for purchase? I don't imaging that it would because many of these areas depend upon subsistence ag and suffer from a lack of infrastructure. One can't eat their insurance payout.

3) Let's say Dr. Joe Climate Scientist predicts a drought year (coupled with climate change of course). If the rates for insurance increase, does the work required for insurance increase? How will such a situation interact with predictions of loan defaults as suggested here.

In 2009, the IRI published a report on their experimentation with index insurance around the world. The report is revealing of some experienced difficulties, what it takes to establish an insurance regime in areas without prior experience with insurance, and the process of creating and characterizing insurable risks.

I am curious to see how this plays out over the years. My cynicism leaves me quite skeptical. In general, there seems to be much about the decidedly insurable risks that are hidden behind an array of models and a primary motive for establishing international trading markets. For example, the IRI report mentions that,
Another advantage is that the insurance product facilitates price discovery for Ethiopian drought risk in international financial markets. Putting a price on drought risk allows for better understanding of investment tradeoffs for mitigation/ management of drought risk.
Also, thus far, implementing insurance in these rural developing areas is being done on a foundation of implied good faith in the industry, aid groups, and scientists. There seems to be no means of accountability. In the end, it may be that poor farmers are becoming vulnerable to much more then just drought.

Saturday, October 29, 2011

Florida Seeks to Embrace Risk in More Ways than One

Whether or not to embrace the artistic rendering of the most gaudy building yet proposed to disgrace the Miami coastline (and possibly any coastline ever) is but a minor decision to be made compared to the future of Florida's tourism economy.

Historically, Florida was boasted as a vacation destination for those seeking saltwater adventures, the wonder of the Everglades, and the exoticism offered by life intrinsically tied to the ocean and proximal to the tropics. In roughly the late 60's and early 70's, the state was overcome by Disney and came to be touted as a family destination where every child's fantasy could be satisfied amongst life size cartoon characters and "magic." Today, the NYTimes reports, that with the purchase of the Miami Herald building in downtown Miami and the Genting Corp's push for a 30 acre casino project, Florida decision makers are faced with a the decision to embrace a casino based tourism economy or not, beyond that which already exists.

But there are other ways of looking at it. Florida must decide how to best manage its booming population and limited social and natural resources. Whether it be casinos or another Disney park, continued development at this scale is not sustainable. Further, it is ironic these decisions are centered around growing a gaming economy as it is symbolic of the moral decisions facing the state and its most southern region. Who gets to make and influence policy in Florida? What values are going to take priority? Who wins, who loses, and who has to pay to make up the difference?

(10/31/11) In the NYTimes article linked above, Florida Representative Ellyn Bogdanoff (R-FLL) claims that
Everyone is sticking their heads in the sand... Florida has become the fourth-largest gaming state in the country — and we’re an anti-gaming state.
In 2009(?) she is reported to have introduced HB 1157 to
Do away with the state Catastrophe Fund and Citizens. Insurers in the private market would turn over all hurricane insurance policies to a new, state-operated fund just for hurricane policies. Bogdanoff said that by taking on the "one risk" that is making large private insurers flee the state, those companies will return to Florida to offer other important property owner policies like flood and fire.

Bogandoff has a BA from UF in Insurance and Risk Management and
She spent the first 16 years of her career as a shareholder in Setnor Byer Bogdanoff, Inc., an independent insurance agency, and was invited to share her successes with other industry professionals as a columnist in American Agent Broker, a national insurance industry magazine.

Friday, October 28, 2011

Thailand Flooding

The Thailand prime minister and Thai King have interesting responses to the flooding that has overtaken Bangkok recently...

“What we’re doing today is resisting the force of nature,” the prime minister said. “We cannot resist all of it.”

On Friday, General Prayuth Chan-ocha, the army chief, who is reported to have been in contact with the royal family during the floods, said king was concerned that royal residences not be given special consideration in directing the flow of floodwaters.

“His Majesty is very worried about the Thai people,” the general said “He always has been and always will be. That’s him. He doesn’t want anything special, and he said the water must be allowed to flow naturally.”

To insure... well, anything

I am often astonished by the types of insurance products available for purchase. Many are for life's most mundane risks. Some insurance coverage for risks seem misplaced, that is, there ought to be a different way of dealing with it. For instance, insurance coverage for the risk of default on a credit card or loan payment. And I don't doubt that some of these coverages works for some people.

Here is a personal example,
I am near sighted and therefore, I need glasses. As the glasses wearing public knows, glasses are obscenely expensive. The frame, a small molded plastic product usually made in China, costs roughly $200 and then the lenses about another $200. For me, living off government debt and roughly $1500 month, this is no small (annual!) expense. A large commercial glasses retailer offered a 2 for one deal, enabling me to get prescription sunglasses as well, and insurance coverage against damage. The coverage was cheap, $25/per unit for the year and protected me from damage but not loss. For the $25, I could come in and get a brand new pair of glasses. The deal was a good one, but on principle alone, I opted out. I think damage to my glasses is trivial and offering coverage for such a risk is as offensive as how much glasses cost (and my monthly "stipend"). The whole situation seems reminisce of problems with healthcare generally.

In any case, a new insurance coverage is being offered for roughly the same sort of expenses.
ResortQuest, a condominium and home-rental company with properties throughout Colorado, Utah and Idaho, is offering clients a Snow Guarantee, which allows its guests to relocate accommodations to another resort destination — at another company property — at no extra charge in the event of less-than-favorable snow. Customers contact the original destination 72 hours in advance and request a change, or, if they didn't check conditions ahead of time, ask for a move upon check-in...
"One great feature of ResortQuest's program is that our guests get to decide for themselves whether the ski conditions meet their expectations," Cheryl Spezia, vice president of ResortQuest sales and marketing said. “Our Snow Guarantee remains in effect whenever the ski resorts are open, regardless of how many lifts are running. We trust our guests' judgment on what constitutes a good snow report for them.”

... Skiers and boarders also have the option of purchasing season pass insurance, which has been growing in popularity in recent years, according to an article last month in The Denver Post. The insurance — which costs $20 for all four of Vail's mountains in Colorado, Copper Mountain and Intrawest's Winter Park and Steamboat — protects buyers against sudden injury, illness or job change.

It's All Government Cheese

A new report out by several government agencies suggests that food packaging labels offers too much information and not enough guidance. It sounds like they seek to replace existing nutritional information with a symbolic system of healthfulness, but I'm not sure. It may be in addition to nutrition information.

The study was conducted "In light of the persistent disconnect between dietary recommendations and Americans' actual diets."
The committee concludes that it is time for a fundamental shift in strategy, a move away from systems that mostly provide nutrition information without clear guidance about its healthfulness, and toward one that encourages healthier food choices through simplicity, visual clarity, and the ability to convey meaning without written information.

Who decides what is healthy? Anyone not making the cut and deemed to be acceptably situated on the scale of healthfulness will be a loser, so what is and what is not considered healthy will have to be negotiated amongst the powers that be. Such a process could politicize the labeling system and the science that is used to argue for a particular label.

In effect, this is a new risk communication system.

Wednesday, October 26, 2011

A Correlation Sales Pitch?

In catastrophe models produced for the Florida property insurance market, science need only be published in a peer review journal. Of all the science that is produced regularly, which science gets chosen to support the public's goals? The decision of which science to use might consider some involvement of who such usage will benefit and if it is its usage is warranted. For instance, who does it benefit to include climate change predictions in insurance ratemaking? And, with losses resulting primarily from social factors, is it warranted to include such information?
Recently, I received an announcement about a campus talk. The talk is being given by Dr. Peter J Webster. Webster is noted for his work on tropical cyclones and climate prediction generally. The following announcement leaves one's imagination to wander and wonder, who will benefit from this science? Additionally, who identified and framed this social problem- which seems to be a correlated risk between monsoon loss and microloan default to be solved with climate prediction? In fact, several researchers have document serious social problems associated with climate and weather forecasts being used bu financial institutions in developing areas. See for example here.
Probability, Prediction and Decisions: A Pathway to the alleviation of poverty in the developing world

During the last few years, radical economical ideas have been put forward to allow people to emerge out of poverty. Muhammad Yunis introduced the concept of micro-loans that “lend money to people who need the money (Yunis)” for which he received the 2006 Nobel Prize in Economics. Through this method, thousands of people in the less-developed world have slowly eased themselves from poverty and “now go from door to door selling things and not begging (Yunis)”. But there is a bigger problem that effect 10’s of millions of the poor each year: slow rise monsoon floods. These extremes visit Bangladeshis and Indians multiple times in a generation and are relentlessly impoverishing. After such events, loans still have to be repaid and the treadmill of poverty increases the slope of the treadmill of intergenerational poverty.

We ask a simple question. Is it possible that environmental predictions of natural hazards delivered to communities in the most effected regions can reduce the devastating economic social impacts? In parallel with Yunis, can the introduction of environmental hazard forecasts to those who need them at the village or union scale impart a reduction in poverty? We will discuss the results of a decade long experiment in Bangladesh where a scheme for the probabilistic prediction of floods out to 10-days has been developed and implemented. Since 2007, the system has been operational and attached to a warning system where communities are trained to use forecasts and take remedial actions ahead of flooding to reduce their impacts. Economic analyses show that communities that used the forecasts made savings in units of annual income.

Finally, we consider a warming world where flooding in South Asia is projected to become more frequent and intense. For example, the return time of Ganges and Brahmaputra extended 10-day flooding is expected to half during the next 50 years to every 3 years. We close with the conjecture that societies that learn to deal with current environmental hazards will be best equipped to deal with the greater risk of hazards in the future.
I saw the talk.  It covered a lot of ground, potentially appealing to an array of interests.  It also seemed to make an earnest appeal to helping farmers make better decisions about their crops.  Several research projects were introduced such as SHAZAM and RIMES that sought to aid decision making by producing predictions and forecasts.  In Webster's opinion, sustainability will be imposible without the use of hydrometeorological predictions.  This was in the midst of extended discussion of monsoon predictions with IPCC predictions of future climate. 

Intermittently in the discussion were words like "aggregated risk,"  "catastrophic risk" which is primarily a finance term.  There was also a distinct appeal to the willingness and ability of poor Bangladeshi and Pakistani farmers to use risk concepts and understand risk.  He also mentioned briefly microlending institutions and even when there are floods, "the loans still have to be paid back."