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Original Risk: A Society for Change Agents

Comparison of near-term hurricane models


Karen Clark & Co., the catastrophe risk consultancy, has published a paper discussing near term hurricane models and how well (or badly) they have performed. They discuss the three big risk modelling companies who launched their near-term hurricane models in 2006 – AIR Worldwide, EQECAT and Risk Management Solutions (RMS).

It makes for interesting reading and shows the difficulty with predicting losses associated with hurricane seasons. None of the models performs particularly well in this respect.

Karen Clark, president and CEO of Karen Clark & Co. says that these models are limited and don’t have a lot of data behind them (with the limitations on data being on the scientific data not the modelling companies). She stresses that insurers must remain aware of the limits of risk models and not view them as a substitute for underwriting diligence. Clark says that insurers can augment their catastrophe models using geospatial data about buildings locations and structural characteristics. In addition to this insurers can glean useful information for modelling from their own claims data.

Download and read the full report here (in Adobe PDF format).

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