Abstract Risk-based decision making has been always important in everyday business life. Enterprise risk management (ERM) is the state-of-the-art approach to manage risks facing an organization from system perspective. This paper provides a review of popular literature in ERM using management science approaches, and an introduction of the special issue.

Earthquake risks are attracting increased attention as a result of recent catastrophic events such as the Wenchuan earthquake in China. This article aims to select, tailor, and develop loss modeling methods for catastrophic insurance. We review the state-of-the-art approaches in modeling catastrophe losses for catastrophe bonds' modeling and pricing. The methods are applied to the 1966-2008 losses resulted from the earthquakes in China. Various error measures are proposed for validating catastrophe modeling. Results suggest that the double exponential jump-diffusion model fits the data well.