Digital Diatribes

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Archive for the ‘Peer Review’ Category

The Embarrassment That is the Allianz Climate Change Report

Posted by The Diatribe Guy on May 30, 2012

I am an actuary in the insurance industry, and so receive information of all sorts that are supposed to enlighten me and assist me in my job.   Whether it is a better model to use in forecasting future experience based on current trends for the purpose of pricing products, or accurate assessment of ultimate losses on current inforce products, it is imperative that I understand new advancements in predictive modeling, underlying trends, and results of different studies to most benefit my company and the customers we serve.

In this capacity, I recently came across a 97 page effort by Allianz, in partnership with – get this – the WWF (World Wide Fund for Nature), entitled “Major Tipping Points in the Earth’s Climate System and Consequences of the Insurance Sector.”   As someone who wants to base pricing considerations on observed experience and modeled trends, I was curious about this paper, and how it is implied that this is to be used by the insurance industry.   The report isn’t a new one, but it was  the first I had run across it.

The very first line of the paper reads:  “Climate change resulting from emissions of CO2 and other greenhouse gases (GHGs) is widely regarded to be the greatest environmental challenge facing the world today.”

 

Ominous.

 

Page one teaches us some interesting details.   I learned that there is no global agreement or scientific consensus for delineating ‘dangerous’ from ‘acceptable’ climate change, but 2 degrees Celsius seems like a good number.   The origin of that 2 degree number is not clear, but seems to be promoted based on the UNFCCC Assessment Report (AR4).

 

We then learn about tipping points.   The theory here is that, while temperature may increase gradually, there are points where a small change can make a big difference in the system.  The cited reference here is M. Gladwell, “The Tipping Point: How Little Things Can Make a Big Difference.”    It is unclear to me if this is a how-to book on marriage, or something spelling out the global catastrophes to come, but apparently it’s good enough for the reinsurance industry.

 

Well, anyway, this is just the Executive Summary, which includes examples of Tipping Points.   It appears we are talking about disasters such as effects of rise in sea levels, a shift in monsoon seasons, Amazon drought, and an overly arid Southwest U.S.   No mention of comets or alien attack, so I guess we’re sticking to “things we can control.”

 

There is then a touching “Take Home Message” to conclude the Executive Summary.   We learn that past emissions have already committed us to at least 0.6 degrees of further warming.   Because we’re lazy and lackluster in our efforts to combat it, the 2-3 degrees scenario is almost certain to happen.

 

Ominous.

 

I must say, as I read the actual body of the document, I was pretty disappointed with my reinsurance brothers and sisters.    We start with simply references to other works, clearly fed to them by WWF and other environmentalist groups.    UN studies, IPCC papers, etc. tell us there will not be a smooth transition into warmer temperatures.  This leads into the definitions and characteristics of tipping points, which – let’s be honest – insurance people will not know whether the studies they are reading are right or wrong.   They’re insurance people.  But in any case, it doesn’t appear that there was a serious attempt to reach out to alternative opinons on the matter.   Nobody called me, which can be expected.   More importantly, I don’t think Dr. Roy Spencer got a call either.   I don’t even think Jeff from the Air Vent was consulted.   A travesty.

 

Section 2 focuses on identifying tipping elements based on IPCC AR4.  

On a serious note, from a reinsurance standpoint, the things they are looking at need to be considered for the purpose of understanding exposure to risk.   What kind of storm activity tends to occur with changes in the ENSO amplitude?   What is the exposure in the event of differences in monsoon activity around the globe?   What are the insurance impacts to glaciers melting? What are the impacts of this event or that event?   All legitimate questions to make sure the company can sustain viability should certain things occur that impact loss payouts.   The issue I have here is putting such study in a document that doesn’t just use global warming theory as a “what if” scenario, but presents it as a given.

 

We then get into all sorts of scenarios around different tipping points.   It’s all the same stuff: Greenland, Arctic Ice, sea level rises, the Antarctic, carbon stores in permafrost (amplified global warming, you know), and so on.   Then, we get into tipping points that can tip other points, or something like that.

 

Section 3 highlights the greatest risks to our dismal future.  

 

So, what am I most disappointed in?   My disappointment is mainly that this is a piece of propaganda disguised as an insurance study.   If it is an insurance study, it’s a horrible one, and I’d fire anyone who resented it to me as a definitive assessment.   I see no industry experience and actual trends presented.   It is a “study” in the sense that it covers a lot of “what if” scenarios, which is an entirely legitimate exercise, but it provides them as a near certainty as opposed to a random probabilistic event.   Oh, sure, there are a lot of graphs and charts that lead one to believe that this is a rigorous study, but it is not.    It is a study that has, at its basis, a complete trust in the views and conclusions of a few UN-sponsored reports and other data that is derived in its entirety from the pro-AGW side.   It reeks of being a UN lapdog in anticipation of taking advantage of climate change scenarios and scare tactics for a lining of the pockets and future power grab.  

 

The study into the “what-ifs” seems pretty sound.    This part is fine, which is what I would expect from experts in the reinsurance industry, because this is what they do: they assess exposures, risks, and loss impacts GIVEN A SCENARIO IN WHICH TO ESTIMATE THAT IMPACT.     This paper, however, assumes the scenario to be reality.

 

So, what is my analysis on why Allianz would release an otherwise legitimate exposure analysis in the form of a drivel-packed, politically correct, report?

 

M.   O.   N.   E.   Y.

 

Suppose that Allianz convinces regulators and customers alike of the need for a “loss provision due to global warming impacts” in their policies.   Imagine tax advantages for surplus funds set aside for these events.   Now, imagine that every future weather event can be attributed to global warming…   wait…   I mean, Climate Change, so that a demonstrable drawdown on “global warming reserves” reinforces the idea of human-cause impacts on the weather and storms.   The propaganda becomes self-perpetuating, and ever more profitable.   At some point, it is likely that all weather risk can be transferred at a guaranteed margin to a global fund to cover all climate-change related events.  More conspiratorial, imagine a world of crony capitalism where those who were on the “right side” benefit disproportionately as the UN wields more power and is able to give preferential treatment to its friends with the “right” message.

 

This is simply Allianz seeing the future and hoping to profit from it.   And to help it along, what better than to actually promote the entire idea yourself?   All-in, so to speak.

 

Yeah, color me skeptical.   

 

I’ve got news for everyone who wants to give reinsurers the benefit of the doubt.   I’ve been in this business long enough to realize that despite all their fancy modeling and theories, they are the least rational reactionaries to risk there is.   Supposedly, this price is based on long-term history until something happens, at which time your rates quadruple.    Then, as competitors enter the market, they end up underpricing products.    So, whatever sophistication they start with, it goes out the window in a real hurry.

 

But I’m sure this is different.   And I’m sure they mean well.

 

For more fun with Allianz and climate change tipping points, check this out: http://knowledge.allianz.com/climate_tipping_points/climate_en.html

Posted in Actuarial Topics, Allianz, Business, Climate Change, Environmentalism, Global Warming, Indoctrination, Information, Peer Review, Politics, United Nations | Tagged: , , , , , , , , , , | 3 Comments »

The Ultimate Peer Review

Posted by The Diatribe Guy on April 2, 2010

The following is a guest post by Bob Heiderstadt.   I, firstly, must apologize to him for not having posted it months ago when he first submitted it to me as a potential guest post.   Bob, I did not pass it along for any issues that I had with it, it is just one of those things where I put it in a folder to look at later, and just never did.

Anyway, it is not about Climate Change, per se.   But so much of the debate about climate science these days – and highlighted by the Climategate scandal – is about peer review.   Many times when a very eloquent and insightful argument is made on a blog somewhere, one of the immediate tools of defense of those dismissing the argument is because it isn’t peer reviewed.  While it seems an agreeable practice to have peer review, Climategate demonstrates a darker side to it:  when the review group is a smaller circle unable to review a work in an unbiased fashion, and instead looks for ways to discredit a paper not because of its science, but because of its conclusion, we have a problem.

Bob put together some thoughts on what an open and honest process may look like.   Such a process seems more open.   A paper should be judged by its content, scientific application, accuracy, and presentation.   Not by titles or preconceived conclusions.

The Ultimate Peer Review

Guest Post by Bob Heiderstadt

Wikipedia says “Peer review (also known as refereeing) is the process of subjecting an author’s scholarly work, research, or ideas to the scrutiny of others who are experts in the same field. Peer review requires a community of experts in a given (and often narrowly defined) field, who are qualified and able to perform impartial review. Impartial review, especially of work in less narrowly defined or inter-disciplinary fields, may be difficult to accomplish; and the significance (good or bad) of an idea may never be widely appreciated among its contemporaries. Although generally considered essential to academic quality, peer review has been criticized as ineffective, slow, and misunderstood.”

A PhD can be jokingly described as “someone who knows almost everything about next to nothing.”  Seriously though, someone who has earned a PhD does know significantly more about a particular subject than the vast majority of the population.  In fact, there may only be a handful of individuals who may as knowledgeable about a particular subject, regardless of whether it is in the social sciences or the hard sciences.

No PhD, regardless of how knowledgeable he/she is in a particular subject, can be considered an expert in all of the related areas that support his/her area of expertise.  A scientist, for example, may be an expert in his/her area of science, but may have only adequate training in statistical analysis or language to analyze or express the analysis.  This is not to say that their skills are inadequate in the support areas, but it’s impossible to be an expert in everything.  This is where the assistance of others who are more knowledgeable in those support areas provides a great benefit, or added value, to the expert in preparing a study for publishing.

The internet has become the ultimate peer review, not because a paper is reviewed by a select few experts, but because it can be reviewed by anyone, from a high school dropout with an interest in the subject, but with maybe a unique insight, to the PhD who is an expert in the area of study. Granted, some comments will not be helpful, but as the analysis of Stieg, et al has demonstrated, a team of people who are not necessarily experts in that particular area of science, but may be engineers, statisticians, economists, and yes, scientists can make a valuable contribution to the review.  It is that varied experience and knowledge that can bring a different point of view to a study and point out deficiencies or irregularities in the analysis or presentation that ultimately make the study better.  This is the true essence of peer review, to try to obtain the best product possible, while winnowing out the junk.

With this in mind, I propose the following:

  1. Establish an internet web site to behave as a repository for papers submitted for review and give it a name similar to “SciencePeerReview.com or .org”
  2. Establish different categories of science to be reviewed (hard sciences or soft sciences).
  3. Provide sufficient storage to accept large papers and supporting data
  4. Develop a way to pay for the web site (advertising or a fee paid by the submitting individual(s).
  5. Accept only papers submitted with supporting data and procedures (data and software)
  6. Submitted papers should be in a pdf, Microsoft Word®, or Open Office format.
  7. Allow any individual to review and comment on any paper with the following restrictions:
    • The individual must identify himself/herself to the web site and provide minimal information regarding education and/or credentials and experience.
    • Comments must be pertinent to the paper being reviewed and polite.
  8. Optionally, a reviewer could receive an automated ID for the author, permitting anonymity.
  9. Allow two different styles of comments:
    • Blog style – visible to other reviewers or optionally for the author only.
    • Document style – for detailed analysis of submitted paper (see 6 above), again with the option to post for other reviewers or directed to the author only.
  10. Allow the author to request a specific review period based on the size and complexity of the paper so that there would be adequate time to complete a review
  11. The author could respond to comments to clarify stated concerns (blog style).

 

Whether the final paper is presented on this site, or through some other venue, should be at the option of the author, although if published somewhere else, the appropriate reference should be made.

Since this is about peer review, if you read it, please comment on it to make it better, or comment even if you think it is a lousy idea.  That’s the whole point.

Posted in Guest Posts, Peer Review | Tagged: , , | 4 Comments »