Boomhauer: Disaster risk requires simulation models due to thin historical records
Dr. Judson Boomhauer · How climate disasters are shaping insurance markets · Apr 10, 2025 · at 8:47
Environmental economist Dr. Judson Boomhauer explains to host Shail Khan why catastrophe insurance pricing differs fundamentally from life or auto insurance.
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“Natural disaster events are just fundamentally different because we, you know, thankfully have not had a thick enough historical record of disaster events that we can price these things using the statistical methods that are standard in other lines of insurance, and that means that we're reliant on, on a set of tools that are much more kind of simulation and engineering based, and so chief among those is what we call catastrophe models, which are tools that insurers and consultants to insurers use to develop a best guess of the range of disaster outcomes that might affect a given customer in a given year.”
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