Published on July 2nd, 2013 | by Stephanie
Talking catastrophe models and MPE with Dr Robert Muir-Wood
Insurance companies use catastrophe models to predict loss. Dr Robert Muir-Wood, Chief Research Officer, RMS – Risk Management Solutions, has an alternate use for these models. He aims to answer the questions:
How many casualties will there be in a certain catastrophic event? How are the livelihoods of survivors effected?
We are really excited — and fortunate — to have Dr Muir-Wood in Australia to present: Saving lives and money – the second wave of catastrophe modelling on the Wednesday of MPE Australia: The Conference.
25 years ago insurance companies wanted to know what would be a fair price to charge for catastrophe insurance. Dr Muir-Wood said that ‘this is a difficult problem to answer… catastrophes are so rare and extreme when they happen… Simulations were built to model huge quantities of virtual catastrophes to make a complete set of potential events — to work out a fair price.
The amount of things that one must consider when creating these models is enormous. I was astonished at the list of variables Dr Muir-Wood recited – and he was only talking about modelling cyclones!
Dr Muir-Wood uses the same methodology that looks at insurance loss to understand casualties in disasters. Causalities in this sense are the types of things that the disaster risk reduction community looks at: loss of life, livelihood, material possessions, homes, community.
‘I will be talking about… the translation of how the work done in the insurance sector… can be used to asses the humanitarian issues around catastrophes,’ said Dr Muir-Wood. This is an innovative aspect of probabilistic catastrophe modelling. And I cannot wait to hear more about it.
I asked Dr Muir-Wood what is the process and what do you need to build a catastrophe model? To which he answered: ‘A bunch of mathematicians!’
‘It [catastrophe models] really is the application of mathematics into a commercial sector. What started out as a small university research project 25 years ago is now business activity worth a billion dollars a year,’ Dr Muir-Wood said.
And it is the bunch of mathematicians gathered for MPE , that Dr Muir-Wood is looking forward to.
‘I am curious to learn what they are up to and how they are going to communicate to a broader audience their scientific research,’ he concluded.
I guess Dr Muir-Wood and I have something in common!