The risk of landfalling hurricanes in the Atlantic basin for the next five years remains significantly above that averaged over the long term - that is according to Risk Management Solutions.

It confirmed its modelled hurricane activity rates for 2008 to 2012 following consultation with a group of the world's leading hurricane researchers.

Results from those discussions suggest that the average risk of landfalling hurricanes in the Atlantic basin for the next five years - known as 'the medium-term view' - remains at approximately the same level as has been predicted for the past two years, which is significantly above the risk averaged over the long term.

Therefore, medium-term hurricane activity rates in the 2008 version of the RMS US Hurricane Model will remain unchanged from the existing 2007 version.

The current activity rates lead to estimates of average annual insured losses that will be 40 percent higher than those predicted by the long-term mean of hurricane activity for the Gulf Coast, Florida, and the Southeast, and 25-30 percent higher for the Mid-Atlantic and Northeast coastal regions.

Seven experts from North America, Europe, and Asia participated in the annual elicitation in Miami last month. This highly-respected and innovative approach to estimating hurricane landfall rates allowed leading researchers to review a range of statistical models representing alternative perspectives on potential hurricane activity in the Atlantic, including the possibility for decreasing activity over the next five years.

The experts were then asked to weight the various models to provide their best estimate of the landfalling hurricane risk in the US and Caribbean from 2008 to 2012.

"Although US hurricane-related losses have been low since 2004 and 2005, it was apparent from the views expressed among the experts that we are still in a period of elevated hurricane activity that started in 1995, and that this is likely to continue for at least several more years," said Dr. Claire Souch, senior director of model management at RMS.

"However, there remains disagreement and uncertainty about what is driving the change in hurricane frequency, with some researchers believing it is mainly due to natural cycles in oceanic circulation, and others arguing it is primarily caused by human-induced climate change."

The 2007 hurricane season has seen 14 named storms, which is close to the annual average of 14.7 since 1995. It is the first season ever recorded in which 40 percent of hurricanes reached category 5 status, and the only one in which two maximum strength storms struck land.

The US coast was spared the potential devastation of Hurricanes Dean and Felix due to the fortunate coincidence of a high pressure system off Florida that steered the storms south to sparsely populated areas of Mexico and Nicaragua.

Had this high-pressure system been in its typical position further north near Bermuda, the hurricanes may have taken a different track, potentially causing catastrophic damage to the US.

Since 2005, RMS has conducted an annual review of Atlantic hurricane activity rates to provide an independent and accurate view of risk through a medium-term model, ensuring that insurers and their policy-holders can understand, manage, and mitigate the risk effectively.

This year's elicitation confirms the view that the long-term historical average of hurricane activity does not distinguish well between periods of higher and lower hurricane frequency and significantly underestimates the current level of hurricane hazard along the US coast, leaving insurers and their policy-holders more exposed than they believe.

The implications of this conclusion are particularly salient for the State of Florida. Currently, the Florida Commission on Hurricane Loss Projection Methodology must certify a catastrophe model for use in homeowners ratemaking within the state of Florida based on a series of complex data, actuarial, and meteorological standards.

This certification does not affect the general use of models for internal risk modeling or reinsurance pricing, structuring, and purchasing, or use in other states.

"We remain dedicated to engaging with the insurance industry, the regulatory environment, and public policy officials to articulate the risk facing the US and to actively develop mitigation and response measures to reduce the risk," said Mitch Sattler, vice-president of public policy for RMS.

"We support the ultimate goals of regulation and will continue to pursue discussions with the FCHLPM and other regulatory bodies to create standards that encourage modeling techniques aimed at characterising risk as accurately as possible."