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RMS Reaffirms Five-Year View of Increased
Hurricane Activity in Atlantic Basin
Newark, Calif. – November 22, 2006 – Risk Management Solutions (RMS)
today reaffirmed its medium-term five-year view of landfalling hurricane
risk for the period of 2007-2011. The company is projecting higher
modeled annualized insurance losses by 40% on average across the Gulf
Coast, Florida, and the Southeast, and by 25-30% in the Mid-Atlantic and
Northeast coastal regions relative to those derived using long-term
1900-2006 historical average hurricane frequencies. RMS first released
this view of risk before the 2006 hurricane season, for the five-year
period of 2006-2010.
“As part of our annual review of medium-term landfall frequency in the
Atlantic, RMS held its second expert elicitation in October 2006,
presenting a range of statistical models to a panel of seven of the
world’s leading hurricane scientists,” said Joshua Darr, director of
model management at RMS. “This expert panel concluded that the
forthcoming five-year period of hurricane landfall frequency would be
very similar to our original five-year projection established last
year.”
A key driver of the current elevated view of landfalling hurricane risk
is an increase of more than 30% in the modeled frequency of major (Saffir-Simpson
Category 3-5) hurricanes making landfall in the U.S., to account for
current elevated levels of hurricane activity in the Atlantic basin that
are expected to persist for at least the next five years. The increased
frequency and intensity of hurricane activity in the Atlantic Ocean
Basin, as observed since 1995, are driven by higher sea surface
temperatures in the tropical North Atlantic and by associated changes in
atmospheric circulation.
Mr. Darr added that the experts also reaffirmed that the “increase in
activity of the most severe Category 3-5 hurricanes will be higher than
the increase in Category 1-2 storms, based on the high likelihood of
warmer than normal sea surface temperatures in the tropical Atlantic.”
This outlook was implemented into the RMS® U.S. and Caribbean Hurricane
models as part of the May 2006 release of the RiskLink® and RiskBrowser®
6.0 catastrophe modeling platforms. While the forward-looking view of
hurricane risk will not need to be changed in the spring 2007 release of
RiskLink® and RiskBrowser® 7.0, there will be additional incremental
updates for residual demand surge effects, continued advancements to
storm surge modeling, and additional vulnerability classes.
RMS will continue to monitor, publish, and apply the five-year
forward-looking view of activity rates, in conjunction with convening an
expert elicitation of leading hurricane climatologists on an annual
basis.
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