The quantification of low-probability-high-consequences events: Part I. A generic multi-risk approach

Abstract

Dynamic risk processes, which involve interactions at the hazard and risk levels, have yet to be clearly understood and properly integrated into probabilistic risk assessment. While much attention has been given to this aspect lately, most studies remain limited to a small number of site-specific multi-risk scenarios. We present a generic probabilistic framework based on the sequential Monte Carlo Method to implement coinciding events and triggered chains of events (using a variant of a Markov chain), as well as time-variant vulnerability and exposure. We consider generic perils based on analogies with real ones, natural and man-made. Each simulated time series corresponds to one risk scenario, and the analysis of multiple time series allows for the probabilistic assessment of losses and for the recognition of more or less probable risk paths, including extremes or low-probability-high-consequences chains of events. We find that extreme events can be captured by adding more knowledge on potential interaction processes using in a brick-by-brick approach. We introduce the concept of risk migration matrix to evaluate how multi-risk participates to the emergence of extremes, and we show that risk migration (i.e., clustering of losses) and risk amplification (i.e., loss amplification at higher losses) are the two main causes for their occurrence. © 2014 The Author(s).