EQECAT Releases New Hurricane Model Software

September 21, 2007

EQECAT, Inc., a subsidiary of ABSG Consulting Inc., announced the release of its “3.10” catastrophe management software, which includes its next generation model for Atlantic basin hurricanes.

“The storms of 2005 identified the critical need for insurers and reinsurers to adequately assess their exposure to losses from the combined effect of wind and flood,” explained EQECAT Sr. Vice President Bob Healy.

He also indicated that EQECAT “is the first modeler to offer optional detailed modeling of storm surge risk along the United States mainland, including the incremental potential flood damage due to rainfall from hurricanes.” As a result the model gives users a “more complete view of hurricane risk and the key factors driving loss.”

He went on to describe the improvements EQECAT has made in the model in order to provide “the best possible representation of Atlantic basin hurricane risk.” It includes data from the 2005 hurricanes concerning “insurance claims, offshore operator damage reports, and our engineering investigations.”

Healy noted that from the data EQECAT studied, its researchers concluded that “Gulf Coast building damage from hurricanes Rita and Katrina was more than previously anticipated due mainly to greater structure vulnerability, delay in repairing damaged structures and increased damage resulting from falling trees and flying debris from this heavy vegetation.” Those findings are incorporated in the new model

Healy also noted that “prudent assessment of the potential impact of climate change on risk is a critical industry issue.” As a result EQECAT’s model “now provides a ‘push button’ option to view near-term risk throughout the Atlantic basin,” which assures “maximum flexibility in analyzing this risk.”

EQECAT said it has incorporated the “Atlantic Multi-decadal Oscillation (AMO)” into its model. The term refers to “differentiating the frequency of storms occurring during historically observed warm and cool sea temperature cycles.” Healey indicated that EQECAT took the “near-term risk view to the AMO cycle because there is a reliable set of historical events available that differentiates risk during warm and cool cycles.

“EQECAT believes this approach to be more robust than manipulation of frequency assumptions based on conjecture about the impact of potential future climate changes. There seems to be a growing consensus among departments of insurance and others favoring this approach rather than using an opinion based model,” Healy added.

The demand surge component of the EQECAT model has been updated based on the findings from a review of economic data and insurance claims from 2004 and 2005. “While there may be an increase in claims for extreme events, such as Katrina, there is a much lower impact on Average Annual Loss (AAL). This is exactly what one would expect, since demand surge is driven by extreme events and AAL is driven by the more frequent, smaller events. As a result, analysts should not expect a large increase in AAL due to changes in demand surge, except perhaps in a few highly exposed areas such as New Orleans,” Healy concluded.

For additional information about EQECAT’s catastrophe risk models, go to: www.eqecat.com, or call +1 510 817 3100.

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