2004 Hurricane Season White Paper Says Cat Models Need to be Improved

February 22, 2005

The ReAdvisory group of Carvill, a leading specialty reinsurance intermediary, has released a white paper, the “2004 Hurricane Season in Review,” that examines the recent weather patterns and hurricane damage to the coastal U.S., particularly in the State of Florida. Among the themes examined in the new white paper, the following emerge as topics of particular interest:

* Unusual seriality
* Varied windswaths
* Reliability of current reserving estimates

Dr. Steve Smith, an atmospheric physicist and vice president of ReAdvisory, has been researching weather phenomena for 11 years. His research on the 2004 hurricane season concludes that it was an unusual year in one crucial way – seriality. Dr. Smith believes that, as of today, none of the currently available catastrophe models take into account the cumulative effect of serial storms.

“Many insurers will have to critically reevaluate their appetite for risk retention, improve their models, and review how deductibles should be handled moving forward, particularly if the market moves to a per-season deductible structure,” he said.

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