The Aleph Blog » Blog Archive » Hurricane Irene Risk

Hurricane Irene Risk

I invest in a lot of insurance companies.  It is the industry I know best.  When I worked for a hedge fund as an insurance analyst, they called me the weatherman.  I subscribed to a wide variety of services on hurricanes, but I eventually concluded that the forecasts of major hurricane analysts have a bias, and the best thing to do is to look at the error versus the forecasts, because when the error goes to the left, it tends to go further to the left, and vice-versa for the right.  In this case, the storm Irene is rightward biased versus the forecasts.

That’s why I said this two days ago.  It’s easy to panic over hurricanes, but harder to analyze the situation and suggest that the estimate are wrong.

At worst, I think Hurricane Irene will clip the easternmost point of North Carolina at worst, and very possibly miss the US entirely.  Little risk to the insurance industry.






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3 Responses to Hurricane Irene Risk

  1. Steve Milos says:

    Hi David,

    What’s your opinion on the storm now? From a weather report that I’ve seen it looks as though it might hit NJ, NYC, and Boston. Which could account for the panic in the insurers…I bought Berkshire off the panic, and the BAC investment. Funny how Buffett always seems to win…

    Steve
    long BRK.b

  2. [...] on Risk ControlThe Fed: Independent or Unaccountable?25AugApology on IreneI was too bold in my prior statements on Hurricane Irene.  Though ordinarily forecast errors persist, as of early Thursday, the errors have straightened [...]

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