Are the models ready for another active season?
Following the wide-spread destruction from Hurricane Katrina along the US Gulf Coast last August, some modelling programmes were criticised for not predicting the losses with greater accuracy or depth. Since then, all three of the major modelling companies have revamped and improved their models just in time for the 2006 hurricane season.
All three models have been certified by the Florida Commission on Hurricane Loss Methodology. First released in 1994, Eqecat's US hurricane model has undergone five major upgrades and has made several recent enhancements, including the introduction of a new gas and oil model.
AIR Worldwide Corporation, in addition to its standard stochastic hurricane catalogue, will offer two alternative catalogues for the 2006 hurricane season: a near-term sensitivity catalogue, which reflects recent research on the influence of sea-surface temperatures on near-term (approximately five year) hurricane activity, and a 2006-seasonal hurricane catalogue that accounts for the influence of current climate signals on hurricane activity for the upcoming season.
Risk Management Solutions latest version of the RMS US Hurricane Model is the first catastrophe risk model to explicitly incorporate a five-year forward-looking view of hurricane frequency. The new model also incorporates extensive claims research and analysis of building performance, as well as an expanded methodology to assess amplified losses that can occur in severe catastrophes. The model includes new research on identical lines vulnerability, particularly in differentiating regional vulnerability across the state.
Giving some competition to the three modelling companies, a computer-modelling programme that projects hurricane insurance losses has been developed by the International Hurricane Research Center in Florida. The state-funded project took more than four years to complete and cost $2.7m. University researchers and associates produced the model independent of the industry.
The computer model will estimate annual expected insured losses as a result of hurricanes, but it can also provide immediate estimates of losses from specific hurricanes. While it is currently restricted to the analysis of single-family homes, including manufactured houses, future plans call for additional funding from the state to enable modelling of commercial residential buildings.