Friday, October 26, 2012

Preliminary Post: Insurance Tropicali Graph

Square eyes today were a consequence of some time wrestling with numbers on the Southern Oscillation Index. So here is a preliminary graph on the effort subsequent to a more comprehensive post:



The red line here is an historical six year moving average, and the timeframe here is from 1860 until now. The volatile black line is a moving annual average.

This is no doubt metereologically unsound methodology but was selected because six years is the same timeframe the insurers and Guvmint Actary have used to validate historical underpricing in the last six years!

As can be seen the 'historically underpriced' period of the last six years is one of only four similar extreme La Nina events in the 150 years on the record.

Selective data is usually to be expected but how disappointing to see it unprofessionally supported by the Australian Government Actuary in a formal report?

3 comments:

  1. Great post. A picture is worth a thousand words. Where did you get the data from?

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  2. Data and graphs are available at the Bureau Of Meterology website but not always in the most convenient format. So I ended up importing the text file into excel from the Queensland Gov't longpaddock: http://www.longpaddock.qld.gov.au/seasonalclimateoutlook/southernoscillationindex/index.php

    Events can and do happen outside La Nina periods, but the correlation of events with these periods is compelling. BOM estimates the cyclone risk as about double during strong La Nina periods.

    The four periods identified here have all correlated with some of the most extreme flood and cyclone events, just as often flooding in southern Qld as cyclones the tropics.

    There is an interesting paper by McBride published this year on economic impact of cyclones on W.A.

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  3. By the way .... there are some interesting media divergences between certain ministers proclamations that insurance companies had only hiked since the Yasi episode and clear reports that the big hikes had actually started in weeks to precede and ..... correlate quite nicely with climate models? So ... the competitive behaviour of insurers is now based on climate models?

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