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The problem is that the person who judges the probability at 1-in-500 doesn't have any skin in the game. The judgement of the US meteorological office affects
by MarkMc 9y ago
The problem is that the person who judges the probability at 1-in-500 doesn't have any skin in the game.
The judgement of the US meteorological office affects where people can build houses and how much they pay for government insurance. Homeowners have a strong financial interest in underestimating the probability of a severe flood, so there is likely subtle political pressure applied to the met office assessments.
For a more accurate assessment, the government should buy a sizeable insurance policy from several reinsurance companies and use it to calculate the implied probability.
- lutorm 9y agoHomeowners have a strong financial interest in underestimating the probability of a severe flood I don't know about that. Even if I have flood insurance, it's not clear I'm financially better off by having my house flood. It may be a confluence of "financially not fully liable" and wishful thinking, though.
- tuna-piano 9y agoAnd the reinsurance folks seem to say that there is absolutely no evidence that there has been an uptick in these big disastrous storms. People are constantly thinking of global warming, so when they see a storm, they say "Aha! Global Warming!". Of course there have always been hurricanes, and human perception/remembering is not a replacement for statistics and math. From Warren Buffet (One of the largest insurers of this type in the world) "...climate change had not up until then [2016] produced more frequent nor more costly hurricanes nor other weather-related events covered by insurance."" https://www.cnbc.com/2017/02/27/warren-buffett-global-warming-not-impacting-berkshires-insurance-biz.html https://www.cnbc.com/2017/02/27/warren-buffett-global-warmin...