Overcoming Extreme Weather: The Insurance Industry’s Road to Recovery

Kexin Wang ()
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Kexin Wang: Xi’an International Studies University, Business School

A chapter in Proceedings of the 2024 2nd International Conference on Digital Economy and Management Science (CDEMS 2024), 2024, pp 452-460 from Springer

Abstract: Abstract In recent years, there has been an increase in extreme weather events globally, posing challenges to the economy and the property insurance industry. The property-casualty insurance industry needs to adapt to enhance its underwriting capacity and service levels to cope with climate change risks. In order to assess whether insurance companies should underwrite in areas facing an increase in extreme weather events, this paper establishes a risk assessment model. At first, high-frequency indicators are selected as the basis for judgment, and their correlation analysis is performed. And the Bayesian formula was used to estimate the probability of occurrence of a specific extreme weather event. Next, an LSTM model was constructed using historical loss data for predicting the amount of compensation loss in different regions. Then, the TF-IDF algorithm was used to calculate the weights of the events according to their impact on the regions, so as to calculate the comprehensive risk scores of the regions. Finally, the quantitative data of the indicators are used as inputs to the SVM model to categorize the risk of different regions and provide a scientific basis for insurers’ pricing and decision-making.

Keywords: Insurance industry; Extreme weather; Risk assessment model; LSTM model (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-488-4_51

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DOI: 10.2991/978-94-6463-488-4_51

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