Thursday, September 29, 2011

Goldilocks and the Three Risk Estimates

A few days ago, the Florida Office of Insurance Regulation issued their "Decision on Citizens Property Insurance Corporation's Rate Filing".
Homeowners # 11-12402 & 12403
Original Rate Requested 21.2%
Board Proposal
Rate Established 6.2%

Dwelling Fire #11-12716 & 12717
Original Rate Requested 18.1%
Board Proposal
Rate Established 8.6%

[Sinkhole Portion]
Homeowners # 11-12403
Original Rate Requested 447.0%
Board Proposal 41.8%
Rate Established 32.8%

Dwelling Fire #11-12716
Original Rate Requested 631.5%
Board Proposal N/A
Rate Established 96.5%
447% (sinkhole rate request) is an average. In reality the request ranged from 0-2,226.1%.

That's right.

The risk of sinkhole damage is perceived by Citizens to have increased by over 2000% in at least one county (Orange County).

So, what is the right risk?
  • This assessment of risk offered by FLOIR has the backing of the CFO Jeff Atwater (R) who suggests that the original rate request was "too aggressive."
  • Regulator Kevin McCarty states, "Although more credible data and study is required, these established rates will start Citizens on the path of having a sound rate for their sinkhole risk."
  • Governor Scott (R) stated "My goal is to make sure that Citizens is financially viable."

If the risk is unknown then how is progress made towards Citizens' viability or soundness, unless of course, it need not matter and rates should just go up. Just up. Interestingly, McCarty's requisite that more information is needed (interpreted as 'science' on my end) will necessitate that rates go up for two reasons: 1) Science creates uncertainty (ie risk) and 2)If increasing rates is the path to a "sound rate" then science that professes otherwise would be wrong... indeed, McCarty would be wrong.

Monday, September 26, 2011

The Sky is Falling

Evidently, there was a satellite, the Upper Atmosphere Research Satellite (UARS), that was decommissioned and it is thought, to have reentered the atmosphere plummeting towards land sometime between Friday and Saturday. But alas, no one knows where it went. The risk assessment report produced by NASA and available on their website is interesting... and bizarre. Some fun factoids from the report:

-Tracking and Impact Prediction messages provide the best estimates of reentry time and location but have large uncertainties. Even at T –2 hours, the uncertainty of reentry time is on average +/-25 minutes for nearly circular orbits. This equates to +/-12,000 km on the Earth.

NASA conducted a detailed reentry risk assessment for UARS in 2002.
– Number of potentially hazardous objects expected to survive: 26
– Total mass of objects expected to survive: 532 kg (~242 tons, my info)
– Estimated human casualty risk (updated to 2011): ~ 1 in 3200

NASA, the USG, and some foreign space agencies now seek to limit human casualty risks from reentering space objects to less than 1 in 10,000.

In 2009, automobile fatalities was ~11 per 100,000 people. So, if my math is anywhere near right, then, in the US alone, one is 3 times more likely to get hit by a satellite plummeting towards Earth then to die in a car crash. Of course, that is for those limited occasions when a satellite is falling.

Now, couple this with the recent headlines of a space junk problem.

(9/28/11: My boyfriend brought to my attention that 1/3200 may not mean 1/3200 people. It may mean 1/3200 area units or satellite reentering events, etc. He may be right. I don't know. My assumption seems more intriguing though...)

Thursday, September 22, 2011

"Money, It's a hit. Don't give me that do goody good bullshit..."

See video

The NYTimes ran an article yesterday discussing an Oxfam report that villagers in Uganda were violently forced off their land by the Ugandan government and New Forest Company, a British forestry company. The government and the company have interest in the land as a means of involvement in the carbon-credit trade. The article reports,

But in this case, the government and the company said the settlers were illegal and evicted for a good cause: to protect the environment and help fight global warming.

The case twists around an emerging multibillion-dollar market trading carbon-credits under the Kyoto Protocol, which contains mechanisms for outsourcing environmental protection to developing nations.

The company involved, New Forests Company, grows forests in African countries with the purpose of selling credits from the carbon-dioxide its trees soak up to polluters abroad. Its investors include the World Bank, through its private investment arm, and the Hongkong and Shanghai Banking Corporation, HSBC.

In 2005, the Ugandan government granted New Forests a 50-year license to grow pine and eucalyptus forests in three districts, and the company has applied to the United Nations to trade under the mechanism. The company expects that it could earn up to $1.8 million a year.


Oxfam endorses the use of insurance (notably index-based insurance) as a means to help rural farmers adapt to climate change. The insurance industry has been important in establishing a viable carbon trading market by offering insurance against the risk that beliefs about climate change risk will change and being generally involved with the market establishment through the UN.

So... the carbon trading market entices some unfortunate behavior. Insurance supports the belief system required for the carbon trading market. Oxfam supports the use of insurance as a means to address climate change. Oxfam point to the unfortunate behavior tempted by the carbon trading market.