RMS launches latest North Atlantic hurricane model

Catastrophe modelling firm RMS has announced the latest version of its North Atlantic hurricane model suite, which allows users to quantify risk from hurricane-driven storm surge and gain insight into future hurricane activity levels.

“Hurricane Sandy revealed just how real storm surge risk is,” noted Dr. Claire Souch, vice president pf model solutions at RMS. “Our model shows there is a 20%  chance that storm surge loss will be greater than wind loss for any U.S hurricane that makes landfall, which rises to almost 40% along the northeast coast of the United States — this is a risk the market can no longer afford to ignore.”

The version 13.0 model builds on the storm surge methodology that the firm initially launched in 2011.

The model release also includes new data that RMS says allows insurers to distinguish between the potential losses from residential and commercial lines of business.

“Most insurance policies for commercial and industrial lines provide some level of coverage for flood loss, so having an accurate view of storm surge risk is critical to capital management and risk transfer decision-making, through to the structure and placement of cat bonds,” Souch added.

The firm has also issued a new medium-term rates forecast, which incorporates new scientific findings into the impact that sea surface temperatures have on U.S. landfall.

The research, conducted by RMS scientists and currently under peer review, shows how increased hurricane activity in the Atlantic Basin is not always converting to a proportional increase in hurricanes making U.S. landfall.

“Our medium-term rates forecast provides a five-year probabilistic forecast that is unique both within the insurance industry and the academic community,” Souch said. “Our forecast gives insurance companies an additional view of the risk that may be more appropriate to future climate conditions, as opposed to using averages of historical activity.”

The new version also incorporates the most current data from the Federal Emergency Management Agency’s (FEMA) 2012 flood insurance rating maps, as well as updated information on in-force National Flood Insurance Program policies.

“Accurate building elevations data is a key determinant to the accuracy of storm surge loss estimates,” RMS added.