Tag: Karen Clark

“Journos”

There is a reason Nassim Taleb hates “Journos“.

Here’s Everything That Could Go Wrong in 2016 ~ Bloomberg

Investors can’t ignore this or other so-called Black Swan scenarios following a year that surprised the world with record refugee flows and brutal terror attacks. In 2016, unexpected events will take on heightened importance as the Fed ends an era of ultra-cheap credit. Markets will lose the cushion that’s shielded them from geopolitical shocks such as the Arab uprisings and the annexation of Crimea.

You gotta appreciate the way the authors tackle QE describing it as a market risk mitigation tool. Such is a fools game but that is not what attracted me to the piece. What did attract me was the authors terming the events they predict as “Black Swan” scenarios linking Taleb’s book where he coined the phrase. Here is what the cover to the book says:

A Black Swan is a highly improbable event with three principal characteristics: It is unpredictable; it carries a massive impact; and, after the fact, we concoct an explanation that makes it appear less random, and more predictable, than it was.

So yes, Cortez showing up was certainly a Black Swan type event for the Aztecs but not necessarily for Cortez. The again the Aztecs did not have Bloomberg getting them the news. I just question terming the unlikely predictions for 2016 as Black Swans since the writers predicted them.

Speaking of predictions, Black Swans, Normal Distributions and Fat Tails has anyone seen Karen Clark these days?

It is clear that Becky Mowbray has lots of catching up to do……

Folks disappointed would be the word that describes my reaction to Becky Mowbray’s story that appeared in today’s T-P under the lede New Orleans area deserves better insurance options.  I’ll be so bold and suggest that Becky contact Paige St John at the Herald Tribune and Karen Clark, founder of AIR Worldwide because that story in today’s paper was a stinker on several levels IMHO.

The public outreach and education never ends folks.  😉

sop

Jeff Amy reports on risky new models – hurricane, that is (Sports Illustrated reports tomorrow)

Say “model” this time of year and even SLABBED’s most faithful readers are more likely to think “Sports Illustrated” than “hurricane”.  On looks alone, there’s no doubt which of the two models has the most immediate impact.  Long-term impact, however, is a different matter.  The new hurricane risk models will be reflected in the availability and cost of insurance coverage for years to come while SI models change from year-to-year.

Jeff Amy covers insurance issues in Alabama and coastal Mississippi for the Press Register and you don’t want to miss his latest reports on hurricane modeling – or the picture of the model: Short-term hurricane modeling driving up coastal insurance costs, say critics;Coastal homeowners may have less hurricane risk under new computer model:

For context, review Paige St. John and the Herald-Tribune nail the insurance industry! Amy brings St. John’s work close to home: Continue reading “Jeff Amy reports on risky new models – hurricane, that is (Sports Illustrated reports tomorrow)”

Chaney keeps his promise – denies Allstate rate increase!

In an order sent to Allstate, the commissioner said the company failed to justify its rate request and has filed requests for high increases since Katrina in 2005, possibly as a way to price itself out of the Mississippi market. “The upward spiral of rate increase requests since 2005 is indicative of Allstate’s move toward excessive rates in Mississippi,” the Insurance Department order denying the request said. “This commissioner cannot in good conscience approve the rate increase request in light of this information.”
Although neither the press release or the Commissioner’s order were found on a search of the MID website, the Clarion Ledger reported the denial and the Sun Herald published a more detailed story:

As promised, state Insurance Commissioner Mike Chaney has rejected Allstate Property and Casualty Insurance Co.’s request for a statewide rate hike of 44 percent…Allstate requested the rate hike in March, after Chaney had rejected the company’s request for a 65 percent increase…

The Sun Herald story makes several eye-catching points:
  • As previously reported on SLABBED,Allstate “had at least two law firms working on its rate filing, including a Jackson firm that employs Mississippi’s former top regulators, former Insurance Commissioner George Dale and Deputy Commissioner Lee Harrell”.

Lets talk cat modeling and insurance rates: Karen Clark welcome to slabbed.

OK folks, I’ve written a good bit on weather modeling most of which in one way shape or fashion has its roots in the work of Karen Clark, a woman with a keen financial intellect, that literally pioneered the field. Her story is reminiscent of HAL 9000 and a South Park episode. It is also my considered opinion Ms Clark is one of the good guys in the insurance wars.  I mentioned this general topic and its importance with the last State Farm rate hike here in Mississippi using very plain english but no journalist here in Mississippi was up to the challenge of reporting it. I say that because if there is one area in the rate setting process that is completely suspect it would be in the loss assumptions indicated by the models. These concepts are equally applicable in other states besides Mississippi that now face insurance rate hikes such as our neighbor Alabama. Finally in the land where people get it, FLOIR Commish Kevin McCarty busted Allstate using bogus short-term models to calculate a 65% rate hike in Florida in 2008.

Besides Sop, Karen  Clark understands the implications. She left the company she founded, AIR Worldwide (most likely forced out IMHO), founded another company and went public with her concerns on how the information produced by those models was being misused. It was no surprise to me then when a reader sent me this link from the National Underwriter:

Catastrophe modeling firms’ hurricane damage predictions overestimated insured losses for a second year, according to a catastrophe prediction consulting firm.

Karen Clark & Company in a report said models designed to project U.S. Atlantic hurricane insured losses for the five-year period ending in 2010 “have significantly overestimated losses for the cumulative 2006 through 2009 seasons.”

“Hurricane activity is very difficult to project because the Earth’s atmosphere is very complex and has many feedback mechanisms,” said the report. “Given all of the uncertainties, near-term projections do not have sufficient credibility to be used for important insurance applications such as product pricing and establishing solvency standards.”

Predictably Karen’s wayward babies were having none of it: Continue reading “Lets talk cat modeling and insurance rates: Karen Clark welcome to slabbed.”

Attention Mississippi Coast Media: Yes Dave Elliot and Doug Walker you guys too

Time is short for me today but one thing that stood out in the State Farm rate increase application was the use of models to calculate the cat risk assumptions that drive the rate up (and the rate app is woefully short on the assumptions used in these models). In Florida Allstate used very short term models that have proven highly inaccurate to justify rate increases there that Commissioner McCarty turned down. Additionally I highly recommend you contact Beatrice Garcia of the Miami Herald as she reported extensively on the use of those unapproved models back in early 2008. I’d also track down Karen Clark, the person who pioneered the use of weather modeling for insurance for additonal info. You guys need facts, not industry spin to challenge Mike Chaney and this bogus rate up from State Farm.

Weather modeling posts we’ve done on Slabbed:

How’s the weather model – December 2007

Insurance Weather Modeling – Others have questions too – December 2007

On the fallacies of the science behind statistical modeling – April 2008 Continue reading “Attention Mississippi Coast Media: Yes Dave Elliot and Doug Walker you guys too”

Weather Modeling Pioneer Karen Clark Slams Use of Short Term Models

Yep it’s official ladies and gents, short term modeling doesn’t work too well according to Karen Clark:

Karen Clark & Company, independent experts in catastrophe risk, catastrophe models, and catastrophe risk management, today released a report on the performance of near term hurricane models. The report finds the models, designed to predict insured losses in the U.S. from Atlantic hurricanes for the five-year period ending in 2010, significantly overestimated these losses for the cumulative 2006 through 2008 hurricane seasons.

Slabbed readers can obtain a pdf of the report here. The press release continues:

Near term models were introduced in 2006 by the three major catastrophe modelers − AIR Worldwide (AIR), EQECAT and Risk Management Solutions (RMS). AIR initially predicted an overall annualized increase in hurricane losses of 40 percent above the long term average, but later lowered that figure to 16 percent in 2007. EQECAT predicted increases of between 35 and 37 percent, and RMS consistently predicted an overall increase of 40 percent above the long term average.

Assuming long term average annual hurricane losses of $10 billion for each year, these figures translate into cumulative insured losses for 2006 through 2008 of $37.2 billion, $40.8 billion, and $42 billion respectively, for the AIR, EQECAT and RMS models. The actual cumulative losses were $13.3 billion, far lower than the model predictions, and more than 50% below the long term cumulative average of $30 billion. Continue reading “Weather Modeling Pioneer Karen Clark Slams Use of Short Term Models”

Insurance Weather Modeling – Others Have Questions Too

Last week I posted a couple of different links to stories on the use of weather modeling in setting insurance rates. I shared some questions that are stuck in my mind on the reliability of the long range forecast. Given the magnitude of coastal insurance rate increases since Katrina struck, the issue of whether consumers of insurance are being treated fairly on price and the use of weather modeling to justify drastic price increases was addressed last week as well in the Boston Globe.

“HOME INSURANCE rates are skyrocketing on Cape Cod, the islands, and in other coastal areas. Driving the increases are concerns by insurers that a major hurricane could wreak the kind of devastation that hurricanes have brought to other parts of the country. Some companies have simply stopped insuring in shore areas, forcing homeowners into the state’s FAIR Plan, the insurer of last resort.

But Massachusetts need not simply accept this price spiral, because the state has options for making insurance more affordable. One is for state officials to take a closer look at the models of hurricane devastation that insurers use to justify their higher rates.

Companies hold these “black box” models closely, but a legislative commission recommended earlier this month that state officials seek access to them. The panel called for a new “independent public entity” to study the reliability of the models. Two members – state Senator Robert O’Leary of Barnstable and state Representative Eric Turkington of Falmouth – went further, calling for the state to create its own model or require that any private model be open to review by the attorney general. Such efforts make sense; rates for a product that homeowners have little choice but to buy ought to be based on defensible criteria.”