The Consortium on Risk in the Environment: Diagnostics, Integration, Benchmarking, Learning and Elicitation (CREDIBLE)

Natural hazard events claim thousands of lives every year, and financial
losses amount to billions of dollars. The risk of losing wealth through
natural hazard events is now increasing at a rate that exceeds the rate
of wealth creation. Therefore natural hazards risk managers have the
potential, through well-informed actions, to significantly reduce social
impacts and to conserve economic assets. By extension, environmental
science, through informing the risk manager's actions, can leverage
research investment in the low millions into recurring social and
economic benefits measured in billions. However, to be truly effective
in this role, environmental science must explicitly recognize the
presence and implications of uncertainty in risk assessment.

Uncertainty is ubiquitous in natural hazards, arising both from the
inherent unpredictability of the hazard events themselves, and from the
complex way in which these events interact with their environment, and
with people. It is also very complicated, with structure in space and
time (e.g. the clustering of storms), measurements that are sparse
especially for large-magnitude events, and losses that are typically
highly non-linear functions of hazard magnitude. The tendency among
natural hazard scientists and risk managers (eg actuaries in insurance
companies) is to assess the 'simple' uncertainty explicitly, and assign
the rest to a large margin for error.

The first objective of our project is to introduce statistical
techniques that allow some of the uncertainty to be moved out of the
margin for error and back into an explicit representation, which will
substantially improve the transparency and defensibility of uncertainty
and risk assessment. Obvious candidates for this are hazard models
fitted on a catalogue of previous events (for which we can introduce
uncertainty about model parameters, and about the model class), and
limitations in the model of the 'footprint' of the hazard on the
environment, and the losses that follow from a hazard event.

The second objective is to develop methods that allow us to assess less
quantifiable aspects of uncertainty, such as probabilities attached to
future scenarios (eg greenhouse gas emissions scenarios, or population
growth projections). The third objective is to improve the visualisation
and communication of uncertainty and risk, in order to promote a shared
ownership of choices between actions, and close the gap between the
intention to act (eg, to build a levee, or relocate a group of people
living in a high-risk zone) and the completion of the act. In natural
hazards this gap can be large, because the cost of the act is high, many
people may be affected, and the act may take several years to complete.

Ultimately, everyone benefits from better risk management for natural
hazards, although the nature of the benefits will depend on location. In
the UK, for example, the primary hazard is flooding, and this is an area
of particular uncertainty, as rainfall and coastal storm surges are
likely to be affected by changes in the climate. A second hazard is
drought, leading to heat stress and water shortages. Our project has
explicit strands on inland flooding, wind-storms, and droughts. Other
parts of the world are more affected by volcanoes or by earthquakes, and
our project has strands on volcanic ash, debris flows as found in
volcanic eruptions (ie lahars; avalanches are similar), and earthquakes.
In the future, new hazards might emerge, such as the effect of space
weather on communications. A key part of our project is to develop
generic methods that work across hazards, both current and emerging.

The uncertainty framework developed by the CREDIBLE project will bring
new approaches into the field of natural hazards and adapt them to the
specific needs of this field. It will create consistency and greater
scientific rigour regarding the estimation of uncertainty in natural
hazard risk assessment. Thus enhancing capacity, knowledge and skills of
stakeholders from private and public sectors, and improve societal
security through better and more consistently informed decision-making
under uncertainty.

Beneficiaries of the proposed research include the whole range of
sectors involved in risk assessment of natural hazards, which is
reflected in our list of project partners. These included the insurance
and finance sector (Willis Ltd., Lighthill Risk Network, Catlin
Underwriting Agencies Ltd), consultants (HR Wallingford, JBA Ltd, RMS),
and the UK government agencies (Environment Agency, Met Office, DEFRA).

The insurance industry will benefit from the more accurate pricing of
contracts. As we explain elsewhere in this proposal, currently many
uncertainties in natural hazards are acknowledged but not explicitly
quantified, and enter into insurance premiums as a loading for risk,
which is effectively a margin for error on top of the expected loss. Our
intention in CREDIBLE is to move some of these uncertainties out of the
margin for error and into explicit assessment, thus improving the
pricing of risk premiums, and, ultimately, the economic performance of
UK insurance companies connected to our project partners. We will also
introduce standard statistical tools for improving efficiency in Monte
Carlo simulations, and for quantifying variability in Monte Carlo
estimates, which will be immediately taken up by CAT modelling companies
(notably our project partner RMS), and feed through into regulation, for
example through quantifying variability in the estimate of the 99.5th
percentile, as required by the EU Solvency 2 directive.

Consultants and agencies will benefit from more powerful tools for
assessing uncertainty, and for propagating it into the choice between
actions. Our environmental consulting project partners (JBA Consulting
and HR Wallingford) focus primarily on flooding, which is also a major
concern for our agency project partners (the Environment Agency, the UK
Met Office, and DEFRA). In flooding it is acknowledged that providing
information about uncertainties is crucial, and this has been reflected
in UK postcode-level flood maps produced by the EA (although technically
these maps convey frequencies rather than probabilities). CREDIBLE's
focus on (i) explicitly assessing more of the uncertainty, (ii)
providing additional tools to represent less-quantifiable uncertainties,
(iii) considering explicitly the link between potential actions,
scenarios, uncertainties and risks, and (iv) visualisation and
communication, will provide a more transparent and defensible assessment
of different actions and consequences. This will promote a shared
ownership of some of the very contentious issues that can arise in
natural hazards, such as developments on flood-plains, or groups of
people who choose to live in the high risk zones of active volcanoes.

This final aspect is an absolutely crucial part of CREDIBLE, and of our
intention to have an enduring effect on natural hazards risk management,
and the quality of life of people who are affected by natural hazards.
Natural hazards interventions (eg building a levee or a barrage,
changing building regulations, relocating a group of people) are almost
always contentious, costly, and take several years. There is a large
gap, therefore, between the intention to act, and the completion of the
action. CREDIBLE can reduce the size of this gap by promoting a shared
sense of ownership, of the science and of the decision.