Why the SEC’s Decision is Misleading, and Meaningless

Many non-specialists are unaware of a recently-created industry of companies that use sophisticated models to try to predict hurricane losses and losses from other types of storms.

In the previous post, I talk about the SEC’s nonsensical decision to “encourage” companies to disclose their exposure to ‘climate change.’ One method of doing that is to use these computer modeling services.

While the models can and do provide useful information when a storm is imminent (i.e., Hurricane X will move into location Y with 120 mph winds and a 15 ft. storm surge), they have shown no detectable skill at forecasting losses years (the timescale for “climate”) into the future. Another new paper shows this to be the case. Roger Pielke, Jr. has more here.  

So, if there is no way to forecast the losses caused by storms, how are companies supposed to — in advance — disclose their losses?

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