Jim Davis discussed the role of modeling and risk assessment in the public policy sector. Loss estimation modeling is useful in identifying, assessing, and managing risk. This information is used by government officials to determine the acceptable level of risk and to come to consensus on how to manage it. Davis stated that public policies should be based on the finding of public models. No black boxes should be permitted so that all assumptions can be openly tested and examined publicly.
Risk analysis using models is useful for helping the public to understand the risks.
This often leads to using earthquake resistant building practices to reduce losses. In California, earthquake risk assessment techniques utilize models and historical data on the frequency and magnitude of earthquakes on individual faults to predict the probability and random distribution of occurrences on other faults. Ron Eguchi discussed how the Northridge earthquake may be viewed in terms of capital losses. EQE compared estimated direct economic losses to actual losses from that event. He stated that gathering actual loss data is important for calibrating loss estimation models following major events.