Counterfactual Disaster Risk Analysis

By Gordon Woo

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Abstract

The statistical foundation of disaster risk analysis is actual loss experience. The past cannot be changed and is treated by actuaries as fixed. But from a scientific perspective, history is just one realization of what might have happened, given the randomness and chaotic dynamics of nature. Stochastic analysis of the past is an exploratory exercise in counterfactual history, considering alternative possible scenarios. In particular, the dynamic perturbations that might transition a system to a disaster state are considered. The value of counterfactual disaster risk analysis is illustrated with examples from a diverse range of natural and man-made perils.

Keywords Counterfactual, disaster, risk, analysis

Citation

Woo, Gordon, "Counterfactual Disaster Risk Analysis," Variance 10:2, 2018, pp. 279-291.

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Mission Statement

Variance (ISSN 1940-6452) is a peer-reviewed journal published by the Casualty Actuarial Society to disseminate work of interest to casualty actuaries worldwide. The focus of Variance is original practical and theoretical research in casualty actuarial science. Significant survey or similar articles are also considered for publication. Membership in the Casualty Actuarial Society is not a prerequisite for submitting papers to the journal and submissions by non-CAS members is encouraged.