RMS Announces Another Update to North Atlantic Hurricane Model

Catastrophe-risk modeler Risk Management Solutions is preparing the insurance industry for an update to the North Atlantic hurricane model that jolted the perception of possible losses when it was released in 2011.

RMS’ Version 13, an update to the now famous Version 11 model, is set to be out in July—with changes to assumptions related to medium-term hurricane landfall rates and the phenomenon known as “leakage.” 

 Claire Souch, vice president of model solutions at RMS, says Version 13 “is not a rebuild or a redo” of Version 11. 

“This is certainly not the update that Version 11 was,” she says. 

Based on its research—taking into account changing sea surface temperatures—RMS sees fewer hurricane landfalls from 2013-2017.

Many named storms, and more intense hurricanes, may continue to form in the Atlantic. In fact, the medium-term forecast is still higher than the historical average of hurricane activity after 1900. But due to where the storms have been forming, the forecast is for fewer landfalls—as has been seen in the last two hurricane seasons. 

Nevertheless, as Souch points out, the last two hurricane seasons have also confirmed the adage, “It only takes one.” Substantial losses in the Northeast were caused by storms Sandy in 2012 and Hurricane Irene the prior year. 

RMS released one range of insured losses from Sandy of between $20 billion and $25 billion.

Recent storms have been good tests for the theory of flood “leakage,” or the payment of flood losses on policies that actually do not cover the peril.

Here, RMS is changing its assumptions to more accurately the fact that the industry “has really gotten on top of the issue,” Souch says. 

Insurers’ claims handling has improved and policy language has been tightened. Additionally, more homeowners have purchased flood coverage through the federal government, Souch adds. 

Sandy was a “verification of this enhancement” to the model, says Souch. 

RMS has been meeting with clients to discuss the changes, providing multiple sensitivity tests—what Souch calls “resiliency risk modeling”—to get a look at the impact of the new model to a company’s portfolio. 

“We have remained transparent to our assumptions and uncertainties,” says Souch. “We think it is critical to understand the data going in, and we encourage clients to make their own judgments.”   

Comments

Resource Center

View All »

Complimentary Case Study: Helping achieve your financial goals By:...

Find out how a Special Investigation Union used TLOxp to save the company money and...

Do Your Clients Hold The Right CDL License?

Learn about the various classes of CDL Licenses and the industries that are impacted by...

Integrated Content & Communications: A Key Business Issue For Insurers

Insurers are renewing their focus on top line growth, and many are learning that growth...

High Risk Insurance Coverage in the E&S Market

Experts discuss market conditions, trends and projected growth in a rapidly changing niche.

Top E-Signature Security Requirements

This white paper covers the most important security features to look for when evaluating e-signatures...

EPLI Programs Crafted Just For Your Clients

Bring us your restaurant clients, associations and other groups and we’ll help you win more...

Is It Time To Step Up And Own An Agency?

Download this eBook for insight on how to determine if owning an agency is right...

Claims - The Good The Bad And The Ugly

Fraudulent claims cost the industry and the public thousands of dollars in losses. This article...

Leveraging BI for Improved Claims Performance and Results

If claims organizations do not avail themselves of the latest business intelligence (BI) tools, they...

Top 10 Legal Requirements for E-Signatures in Insurance

Want to make sure you’ve covered all your bases when adopting e-signatures? Learn how to...

Tech Digest eNewsletter

Technology related insights for insurance professionals including key developments, solution providers and news briefs from the carrier front – FREE. Sign Up Now!

Advertisement. Closing in 15 seconds.