Modeler: '06 Storms May Top Katrina

U.S. insured losses from storms this year have a 5 percent chance of exceeding Hurricane Katrina's $38.1 billion total in 2005, a catastrophe modeling executive warned at an industry conference last week.

Karen Clark, president and chief executive officer of Boston-based AIR Worldwide, gave the forecast at a catastrophe conference in Baltimore, organized by Property Claim Services, a unit of the Jersey City-based Insurance Services Office.

Ms. Clark also predicted catastrophe losses “will double about every 10 years due to increases in the numbers and values of properties at risk,” according to ISO's report of her remarks.

While there is debate about whether warming sea surface temperatures that influence hurricane activity are cyclical or a long-term trend, she noted that the continuing main driver of catastrophe losses is exposure growth.

She said aggregated commercial and residential replacement costs have more than doubled in the United States over the past 10 years. “Changes in the costs per square foot of residential buildings are up 40 percent nationwide,” she said.

A catastrophe event resulting in insured losses exceeding $100 billion “is not hard to imagine,” she said, citing the possibility of a major storm making a direct hit on Miami or sweeping through northern New Jersey, New York, Long Island and New England.

Andrew Castaldi, senior vice president, Swiss Re, said catastrophe modeling has helped the industry cope with record-setting catastrophe losses. Although relatively new, modeling technology has proven itself an important tool in minimizing the economic impact of major hurricanes, he said.

PCS said some 300 catastrophe claims managers, adjusters, reinsurers and other property-casualty industry professionals attended the three-day conference. Conference organizer Gary Kerney, head of ISO's PCS unit, said the conference gives attendees know-how “to help prepare for the next 'big one,' which we all know is coming.”