Abstract of Meeting Paper

Society for Risk Analysis-Europe 1997 Annual Meeting

On the Role of Advanced Modeling in Managing Catastrophic Risks. T. Y. Ermolieva, University of Vienna, Austria; Yu. M. Ermoliev, IIASA, Laxenburg, Austria; and V. I. Norkin, V.Glushkov's Institute of Cybernetics, Kiev, Ukraine

Global socio-economic, technological and environmental changes affect the vulnerability of the contemporary society. The effects of climate change may dramatically increase severity and frequency of natural disasters in many regions. What role can the insurance industry play to protect society against increasing risks?

The insurability of new or rare risks is not simply derived from small data base of past experience. Catastrophes produce highly correlated claims, which are not properly diversified by an insurer without coordinating his decisions with others. In dealing with dependent, rare and catastrophic risks the role of models and accompanying decision support systems becomes of critical importance. Modern computers allow to model in a straightforward manner rather complex processes, which often leads to endless "if-then" analyses. In this paper we emphasize the role of rigorous approaches for the design of robust optimal policies.

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