Between Atlantic hurricanes and Pacific typhoons, the 2004 storm season generated record catastrophe losses. In addition to the quartet of hurricanes that reached landfall in the United States, 10 successive typhoons in Asia further escalated 2004 catastrophe claims.
Benfield, a reinsurance intermediary and risk advisory firm, has reviewed the losses to consider their impact on reinsurance markets in Bermuda, Europe, London, and the United States, providing a listing of loss estimates for many of the major companies in the market.
The report also suggests that modeling methods need to be revised. "The magnitude of Hurricane Andrew in 1992 had encouraged insurers and reinsurers to focus on severity rather than frequency in modeled loss scenarios," according to the report. "The abnormal sequence of four successive hurricanes and the unique nature of Charley is likely to encourage users to review a wider range of scenarios and the data from the unusual concentration of events in 2004 will affect model results."
The report predicts that other improvements likely to be made include adjustment to wind damage functions, assessment of the effectiveness of newer construction techniques and loss mitigation features to prevent loss, re-calibration of overall insured losses to incorporate non-wind damage, such as falling trees, and review of the accuracy of demand surge functions.
The report, 2004 Catastrophe Losses: Hurricanes Hardly Ever Happen, can be read at www.benfieldgroup.com/research.
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