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GRA · Disaster Risk Finance

Spatial financeWhere capital meets hazard, exposure and transition

Forecasting and time-series analysis for disaster risk finance

Forecasting estimates future hazards and impacts from current observations and models. In disaster risk finance it supplies the forecasts and verification that anticipatory triggers depend on, and the seasonal outlooks that shape preparedness funding.

02Application

What forecasting and time-series analysis does here.

Forecasting and time-series analysis predict future values of variables from past observations and explanatory information. They support early warning and planning across hazards, markets and health. In disaster and crisis, sovereign and public finance, development finance and insurance and catastrophe, forecasts trigger early action and anticipatory finance before shocks materialise. Probabilistic forecasts allow decisions to account for uncertainty across connected systems. The canonical description is on the STEM Commons.

Forecast verification for triggers

Hit rates, false alarm rates and lead times are measured for the forecast variable that a trigger uses, before money is attached to it.

Seasonal outlooks for drought finance

Seasonal rainfall forecasts with stated skill inform when and where drought preparedness funds are released to agencies.

Impact-based forecasts

Hazard forecasts are combined with exposure and vulnerability to forecast impacts, which better match the losses finance aims to reduce.

03Spatial finance

A drought index against its attachment point.

How a dry season is read against the point where drought cover starts to pay. Synthetic season and design terms.

A rainfall season across the Sahel, read against the points where drought cover would start and stop paying.Synthetic season and design terms; no cover is implied.
04Data

What the method consumes.

Datasets and records used by forecasting and time-series analysis on this platform, with the role each plays and the label its values carry. Sources are listed in the source register.

DataRoleLabel
Ensemble forecastsTrigger inputsFORECAST
Observation recordsVerificationOBSERVED
Impact recordsImpact verificationREPORTED
05Monitor

Forecast verification.

The screen a team would use to follow this method: its measures, states and decisions. Names are examples and values are illustrative.

Forecast verification

Disaster risk finance · Forecasting and time-series · Run R-3195

Skill above referenceGRA · Disaster Risk Finance

Forecast with range

Method card

Method
Forecasting and time-series analysis
Reference
climatology
Lead times
1 to 9 steps
Label
MODELLED

Verification by lead time

held-out period

T+20.260.110.09Skilful
T+40.330.150.16Marginal
T+60.210.090.30Skilful
T+80.220.150.36Marginal
Forecast verification: the screen's structure, terms and states for Disaster risk finance.Example names and illustrative values; a design, not a record or a live system.
06Validation

How results are checked.

Forecasts are evaluated out of sample with proper scoring rules and reliability diagrams. Rolling-origin evaluation tests performance over time.

CheckHow it is done
Skill by lead timeSkill is reported for each lead time used
Regional verificationVerification covers the region and season of the trigger
Probabilistic calibrationForecast probabilities are checked against observed frequencies

Structural breaks and regime changes undermine models trained on the past. Forecast skill typically declines rapidly with lead time.

07Loss model

Loss exceedance, average annual loss and probable maximum loss.

The loss a portfolio in the footprint can expect per year and at the 1 in 100 and 1 in 250 levels that insurers and lenders price, from the same three blocks every catastrophe model uses. Teaching model with stated illustrative values, not a prediction. The map on this page shows Pacific Island states; the model itself is not tied to a place.

Controls

Typical annual hazard intensity (location)
1.00 intensity index
Spread of extremes (scale)
0.80 intensity index
Intensity at which half the value is lost
4.00 intensity index
Dispersion of vulnerability
0.55
Share of value in the hazard footprint
40%
Protection standard (return period)
50 years

Readouts

Average annual loss
0.51% of value
Loss at 1 in 100 years
24.5% of value
Loss at 1 in 250 years
28.4% of value
Intensity at 1 in 100 years
4.68 intensity index
Numbers, methods and sources
Return period (years)Intensity (intensity index)Loss (% of value)
10.090.00
21.270.00
41.910.00
72.470.00
133.000.00
243.510.00
444.020.00
824.5323.55
1545.0326.44
2875.5328.87
5366.0330.88
1,0006.5332.53

Methods

  1. Gumbel extreme-value hazard Gumbel (1958), Statistics of Extremes, Columbia University Press
  2. Lognormal fragility (vulnerability) FEMA (2003), HAZUS-MH Technical Manual
  3. Exceedance-probability curve and average annual loss Grossi and Kunreuther (2005), Catastrophe Modeling, Springer
  4. Levee effect Di Baldassarre and others (2013), Socio-hydrology, HESS 17
  5. Uncertainty fan (parameter Monte Carlo) Spiegelhalter, Pearson and Short (2011), Visualising uncertainty about the future, Science 333
  6. One-at-a-time sensitivity (tornado) Saltelli and others (2008), Global Sensitivity Analysis: The Primer, Wiley

Data

The model runs on the teaching values set by the controls. To calibrate it for a place, read it against these admitted layers and series, which this page's map can draw:

  • Rivers Natural Earth
  • Urban extents Natural Earth
  • Cities Natural Earth
  • Earthquakes M4.5+, past week (USGS) U.S. Geological Survey · register usgs.earthquake.summary-feeds
  • Rain rate, last half hour (IMERG) NASA GPM IMERG Early · register nasa.gibs.context-live-layers
  • River discharge forecast, 30 days with range (GloFAS via Open-Meteo) Open-Meteo.com (CC BY 4.0), Copernicus GloFAS · register open-meteo.public-pages
  • Built-up and settlement extent, 2010 (HBASE, Landsat) CIESIN/Columbia, NASA SEDAC HBASE · register sedac.context-urban-layers
Loss exceedance, average annual loss and probable maximum loss. Illustrative teaching model: it runs on the values set by the controls, not on measured data. Methods: Gumbel extreme-value hazard (Gumbel (1958), Statistics of Extremes, Columbia University Press); Lognormal fragility (vulnerability) (FEMA (2003), HAZUS-MH Technical Manual); Exceedance-probability curve and average annual loss (Grossi and Kunreuther (2005), Catastrophe Modeling, Springer).
09Twin and cascade simulator

Trace a shock to the balance sheet.

Assembled from the Nexus Standards area profile Disaster and climate risk finance: the shocks it names, the systems and sectors that carry the loss, the controls that dampen it and the data that observe it. Pick an initiating shock and step through the cascade to see which exposures it reaches and where losses could concentrate. The Map view places the run on an example geography with open data. Every weight is a stated assumption. An exercise, not a forecast, a valuation, a rating or investment advice. To model a place of your own choosing, open the full System Builder.

Hazards

  • Tropical cyclone
  • Earthquake
  • Ice-jam flood
  • Storm surge (set off downstream)
  • Intense rainfall (set off downstream)
  • River flood (set off downstream)
  • Flash flood (set off downstream)
  • Dangerous surf (set off downstream)
  • Widespread power outage (set off downstream)
  • Mass displacement (set off downstream)
  • Coastal flood (set off downstream)
  • Aftershock sequence (set off downstream)
  • Fault surface rupture (set off downstream)
  • Soil liquefaction (set off downstream)
  • Slope slide (set off downstream)
  • Rockfall (set off downstream)
  • Tsunami (set off downstream)
  • Building collapse (set off downstream)

Controls

  • NS-0 Constitution and principles
  • NS-3 Risk record UNIs (grammar, legacy crosswalk, allocation authority)
  • NS-9 Contextual UNIs (deployments, instances, programme instances)
  • NS-10 Policies and clauses (machine-readable obligations: definition, binding, evaluation and enforcement)
  • NS-11 Verification and monitoring (evidence, attestations, zero-trust conformance observation)
  • NS-14 Conformance and crosswalk to external standards
  • NRS-F8 Parametric and index-based risk transfer
  • NRS-F7 Disaster risk finance and pre-arranged finance
  • NRS-H113 Hazard family: Financial-system fragility (NHS-1 soc.financial-system)
  • NRS-H114 Hazard family: Macroeconomic and fiscal shocks (NHS-1 soc.macro-fiscal)
  • NRS-D1 Risk-informed development and project screening
  • NRS-H28 Hazard family: Climate-state shifts (NHS-1 eco.climate-state)

Observation

  • ERA5 reanalysis (Copernicus Climate Data Store) (listed for reference)
  • CHIRPS quasi-global gridded precipitation (listed for reference)
  • USGS earthquake GeoJSON summary feeds (listed for reference)
  • Total public international support for national disaster risk reduction actions (Sendai indicator F-1)
  • Direct economic loss attributed to disasters in relation to global GDP

Example geography

  • Western Europe: 152 hexagonal cells
  • Rain rate, last half hour (IMERG), NASA GIBS
  • Night lights tonight, outages (VIIRS Day/Night Band), NASA GIBS
  • Surface water through cloud, 30 m (OPERA DSWx-S1 radar), NASA GIBS
  • Surface soil moisture (SMAP), NASA GIBS
10Stewardship

Who maintains the method.

Climate and Hazards stewards forecasting and time-series analysis for the Consortium and reviews how it is applied across platforms.

11Exposure, loss and capital

What it means for exposure, loss and capital.

The exposure, loss, scenario and capital views a risk officer, supervisor or ministry of finance would ask for, with the frameworks they report against. Structures follow supervisory and actuarial practice. Values are illustrative: never prices, ratings or advice.

Financing instruments by layer

How retention and transfer instruments could share losses from forecasting and time-series analysis for disaster risk finance, from frequent to extreme.

Retention and reservesFrequent, low severityContingent creditModerateParametric cover and risk poolsSevereReinsurance and catastrophe bondsRare, extremeResidual lossBeyond all layersseverity rises upward
LayerWho holds the riskSpeed of fundsMain limit
Retention and reservesBudget, contingency fundsImmediateSize of the budget
Contingent creditDevelopment banks, ministries of financeDays to weeksDebt capacity
Parametric cover and risk poolsRegional pools, insurersDays, on a triggerBasis risk
Reinsurance and catastrophe bondsReinsurers, capital markets investorsWeeks to monthsCost of capital
Residual lossHouseholds, firms, humanitarian fundingUncertainUnfunded
Risk layering as described in disaster risk finance practice; instruments are illustrative of the structure, not offers, prices or advice.
NGFS climate scenarios · Network for Greening the Financial SystemIFRS S2 Climate-related Disclosures · ISSBTCFD recommendations · Financial Stability Board TCFDPrinciples for the effective management of climate-related financial risks · Basel Committee on Banking Supervision
13Questions

Questions and answers.

What are the limits of forecasting and time-series analysis in this field?
Structural breaks and regime changes undermine models trained on the past. Forecast skill typically declines rapidly with lead time.
How are results checked?
Forecasts are evaluated out of sample with proper scoring rules and reliability diagrams. Rolling-origin evaluation tests performance over time.
Are the values on this page real?
The data names, roles and checks are real descriptions of practice. The canvas shows a design of the method's use, not a run; no result is reported here.
Where else is this method applied?
The canonical method page lists every platform that applies it.
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