Catastrophe insurance decision making when the science is uncertain

Richard Bradley

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Insurers draw on sophisticated models for the probability distributions over losses associated with catastrophic events that are required to price insurance policies. But prevailing pricing methods don’t factor in the ambiguity around model-based projections that derive from the relative paucity of data about extreme events. I argue however that most current theories of decision making under ambiguity only partially support a solution to the challenge that insurance decision makers face and propose an alternative approach that allows for decision making that is responsive to both the evidential situation of the insurance decision maker and their attitude to ambiguity.

Keywords: ambiguity; insurance decision making; reinsurance; natural catastrophes; catastrophe modelling; Ambiguity (search for similar items in EconPapers)
JEL-codes: J1 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2025-03-31
New Economics Papers: this item is included in nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Economics and Philosophy, 31, March, 2025, 41(1), pp. 161 - 177. ISSN: 0266-2671

Downloads: (external link)
http://eprints.lse.ac.uk/122339/ Open access version. (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:122339

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().