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http:!!"""#katrisk#com
We are a company (started last year August in US and UK) working on global catastrophe models A longer version of this talk with more details can be found on http: www!katrisk!com "#ample code in $ %&ow to build a catastrophe model' is also on the website (f you are interested in working together with us send me an email: )ag!*ohmann+Kat$isk!com
Agenda
What are catastrophe models "#plain basic risk language Why is this %,ig )ata'.lobal climate data study with $ /odeling catastrophes with $ 0losing thoughts 1uestions
0atastrophe: an event causing great and often sudden damage or suffering Why model catastrophes
,ecause catastrophes are rare events that cause great harm ,uild resilient societies where risk adverse behavior is rewarded Actuarial pricing is based on loss e#perience 3 which is too short
4it fre5uency and severity distribution to past claims 0alculate loss distribution Use for pricing6 portfolio management6 reinsurance
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Build first EQ and hurricane models #1$B insured losses 11 insol%encies #12B insured losses
199$ +irst cat ,onds- Ratin( A(encies re)uire cat loss information 2..1/2..2 012 and first terrorism model 2..3 !urricane 4atrina
$isk 7ocabulary
Hazard: severity6 rate6 return period Vulnerability: inventory6 construction classes Exposure: line of business6 8(7 and 8S( Statistics and analytics: fre5uency6 9)4 and 0)46 e#ceedance probability6 :"96 A"96 ,ayesian statistics6 loss cost6 9/*6 "9 uncertainty Frequently used distributions: 9oisson6 ,eta6 2egative ,inomial6 .amma
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(nsurance 2eeds
Underwriting needs information about local risk at the location level (if that is available 3 otherwise needs good idea about area) 9ortfolio /anagement needs information about correlation between locations and aggregation of risks
0atalog of synthetic events with occurrence probability )amages and insured losses to portfolio Actuarial statistics (AA*6 "9;curves6 !!!) Where do historic events fall on the "9 curve
0at /odels e#tend a company=s loss e#perience with a synthetic event set
4i#ed set of unobserved but realistic events 0alculate ha<ard intensity for all e#posed locations 0alculate resulting damage (9>0) Apply financial structures to model output :utput typically is an "vent *oss 8able
4rom which we can then derive all analytics6 e!g! loss by postcode6 loss by line of business (*:,)6 "96 etc!
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(nput
All suitable meteorological data (last ?@A years) )ata analysis uses many statistical and /* techni5ues (90A ":4 shown later) ?AAk and more ensembles of atmospheric and hydraulic models Use statistical methods machine learning on 8, of data ?AA millions of locations in insurance portfolio that we want to have probabilistic information for )ata si<e e#ample: ?AAk years B ?AAm locs B ? @A occurrence probability C DAAb records to apply financial terms and conditions to
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$isk modeling
(nput
collect all meteorological data (about EA 8, needed) Analysis with $ Use supercomputers (8itan in our case) with .9Us Analysis with $ $: calculation6 (: $ Shiny: web framework *eaflet and /apServer 3 web mapping 7arious $ packages R is deeply embedded in many insurance companies
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F"A$ DA??6 Aug ; 2ov DAAD6 Aug DAAK6 Lun DAAK6 Lul DA??6 Lan DAA@6 Aug
:verall *osses (million G6orig! value) HA6AAA ?J6@AA H6AAA H6AAA D6MAA E6EAA
(nsured *osses (million G) ?A6AAA E6HAA E6AAA E6AAA ?6MK@ ?6KJA ?6DKA ?6?AA ?6?AA ?6AKA
8hailand "lbe ()"6A860I6 &6 0&6 SK) UK UK Australia A86 4$6 )"6 &6 S*6 0& USA UK 4$6 (86 "S 4$
?NNE6 Lun 3 D?6 AAA Aug DAAA6 :ct ; ?6KAA 2ov DA??6 2ov DA?A6 Lun D6?AA ?6@AA
.lobal climate variables are correlated ,ut we have to look for the spatial patterns on the relevant time scales Stochastic model based on SS8 and precipitation anomaly correlations
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We can apply the same method of splitting up a temporal signal for each grid cell
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$ 0ode
sst!file P; open!ncdf(sst!filename) sst P; get!var!ncdf(sst!file6QsstQ) sst!d P; apply(sst6?6detrend) sst!m!anom R compute anomaly (deviation) pca!sst P; prcomp(t(sst!m!anom)6 centerC4A*S"6scoresC86ret#C86 scaleCeof!scale) 0ompare with climate indices enso P; matri#(scan(=enso!t#t=)6ncolC@6byrowC8) enso!inde# P; ensoS6@T sd(ensoS6@T)
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We can then analy<e the temporal anomalies and e#press them in patterns that reduce data si<e (":4 90 analysis)
We essentially separate space and time with this method! "ach spatial pattern (the ":4) has an associated temporal component (the principal component 3 see ne#t page)
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90? is close to the "2S: inde# 90D is close to the Atlantic /ultidecadal :scillation
"2S: A/:
9rocedure: take the SS8 based principal component U? time series (V"2S:) and calculate the anomaly correlation coefficient for each grid cell
We averaged the precipitation anomalies over three month (which increases correlation)! Shown here is the ma#imum cross; correlation! 8ime of lag is shown below!
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Autocorrelation historical
Autocorrelation simulated
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8hree big vendors dominate the market with closed; source software and data formats
2o generally accepted open standard for input and output *imited documentation )ifficult for clients to incorporate their own e#perience and research &igh cost of ownership 7ery high entry hurdle A0:$) data standards :AS(S *oss /odelling 4ramework (*ondon)
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*ocation 7alue *ine of ,usiness ($es6 0om6 (nd6 X) ,uilding characteristics (basement6 masonary6 D stories6 ?NDM) 9olicy terms (deductible6 limit) 0ontracts
7ulnerability
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What do we use
$: calculation6 (: $: link to 4ortran (no Yoke!!!) and 0 0U)A for fast simulations $ Shiny: web framework *eaflet and /apServer 3 web mapping 7arious $ packages
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A 5uick movie
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$ O LS O &8/* 0ode
,uild this before *eaflet package became available with LS6 html
PZ;; Start span J /ap ;;[ Pdiv idCQmapQ styleCQwidth: ?AA\] height: JAAp#Q[P div[ Pscript srcCQhttp: leaflet!cloudmade!com dist leaflet!YsQ[P script[ Pscript srcCQYson S"Asia/i#!smallJ!YsonQ typeCQte#t YavascriptQ[P script[ Pscript typeCQte#t YavascriptQ[ var 5st C new *!tile*ayer(=http: otile?!m5cdn!com tiles ?!A!A sat ^<_ ^#_ ^y_!png=6 ^ attribution:=8iles 0ourtesy of Pa hrefCQhttp: www!map5uest!com Q targetCQ`blankQ[/ap1uestP a[= _)] var floodmap C new *!8ile*ayer!W/S(Qhttp: localhost cgi;bin mapservQ6 ^ map: Q var www /apServer`Apps asia!mapQ6 layers: =Asia`flood=6 format: =image png=6 transparent: =8$U"=6 _)] var map C new *!/ap(QmapQ6 ^ center: new *!*at*ng(D@6??A)6 <oom: @6 minIoom: D6 ma#Ioom: ??6 layers: S5st6floodmapT6 _)] P script[ P div[ PZ;; "nd Span J /ap ;;[
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0ode in progress
1ueries for aggregation by *:,6 area6 construction type6 portfolio6 account6 etc! $eactive code for altering event set (severity6 fre5uency6 correlation) $eactive code for sensitivity studies ,etter mapping (*eaflet package)6 heatmaps6 !! $eporting
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Summary O 1uestions
9lease contact me if you have 5uestions: )ag!*ohmann+Kat$isk!com 9lease look at the e#tended presentation and the $ code on our website 0ome by our office (,erkeley)
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