Counterfactual Disaster Risk Analysis

The statistical foundation of disaster risk analysis is actual loss experience. The past cannot be changed and is treated by actuaries as fixed. But from a scientific perspective, history is just one realization of what might have happened, given the randomness and chaotic dynamics of nature. Stochastic analysis of the past is an exploratory exercise in counterfactual history, considering alternative possible scenarios. In particular, the dynamic perturbations that might transition a system to a disaster state are considered. The value of counterfactual disaster risk analysis is illustrated with examples from a diverse range of natural and man-made perils.