Catastrophe-risk modeler Risk Management Solutions is preparingthe insurance industry for an update to the North Atlantichurricane model that jolted the perception of possible losses whenit 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 tomedium-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 Version11.

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

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

Many named storms, and more intense hurricanes, may continue toform in the Atlantic. In fact, the medium-term forecast is stillhigher than the historical average of hurricane activity after1900. But due to where the storms have been forming, the forecastis for fewer landfalls—as has been seen in the last two hurricaneseasons.

Nevertheless, as Souch points out, the last two hurricaneseasons have also confirmed the adage, “It only takes one.”Substantial losses in the Northeast were caused by storms Sandy in2012 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 actuallydo not cover the peril.

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

Insurers' claims handling has improved and policy language hasbeen tightened. Additionally, more homeowners have purchased floodcoverage 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 “resiliencyrisk modeling”—to get a look at the impact of the new model to acompany's portfolio.

“We have remained transparent to our assumptions anduncertainties,” says Souch. “We think it is critical to understandthe data going in, and we encourage clients to make their ownjudgments.”