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 »

Making Coverage Letters Work for Your Clients

If you're a broker or insurance buyer with any length of service in the commercial...

Complimentary White Paper: The Compression of Workplace Time

How brokers and carriers respond to the compression of workplace time will create significant competitive...

The Changing Insurance Consumer: 6 Ways to Create Profitable Relationships

Today’s mobile and web-savvy consumers have new expectations when it comes to interacting with your...

Contractors General Liability Coverage 102

What is a prior work exclusion? Which option is right for my client? Why do...

Sign up today to get a 50% matching credit -...

Insurance marketing sometimes seems like it's a game of swings and misses, but we're here...

Guide: 5 Steps to Selling Cyber

Cyber risk and data security is on the agenda of every business owner and executive....

Citation Correlation

Do rigger and signalperson qualifications correlate with the cause of crane and rigging accidents? ...

Complete Guide to Electronic Signatures in Property & Casualty Insurance...

In property and casualty insurance, closing new business quickly is key. Learn how to leverage...

INSTANT ACCESS: Complimentary Sales Closer Questionnaires

Help property owners or managers compare your commercial residential property insurance coverage vs. the competition....

Determining Vacant Property Perils and Valuations

Are your clients fully covered for Vacant Properties? In this economic climate, your insureds may...

Risk Management Report eNewsletter

Identify problems involving emerging risks, reinsurance, and business interruption with help from Risk Management Report - FREE. Sign Up Now!

Advertisement. Closing in 15 seconds.