This letter was sent to the Tampa Tribune and copied to The Royal Gazette:

January 9, 2007

Dear Editor,

I am writing in response to the article "Insurance Risk Forecast Called Flawed," which appeared in the Sunday, January 7 issue of the Tampa Tribune. Despite our efforts to help the newspaper publish a balanced viewpoint, we at RMS were stunned by the article's inaccuracies and one-sidedness.

Here are the facts:

RMS has built its reputation on the principles of providing neutral and unbiased information on risk.

Hurricane activity in the Atlantic basin has been running far above the historical average in 9 of 12 years since 1995. As one metric, the annual number of the most intense storms (Category 3-5) has been more than twice that of the average annual number between 1970 and 1995.

In October 2005 RMS convened a meeting of four hurricane climatologists, to develop a consensus forecast of the overall level of U.S. hurricane activity expected over the next five years. The consensus involved weighing the opinions of the four experts, having first provided them with detailed statistics on historical hurricane activity and landfalls. All four scientists, including Professor Elsner, gave their sign-off on the outcome of this process. RMS then took the results of this forecast and implemented them in its hurricane catastrophe model.

RMS climatologists took responsibility for determining where the extra hurricanes would be expected to form, while preserving the overall target activity rates established by the expert panel. A press release and white paper were issued describing this work in detail. Again all four experts were asked to review and approve both documents, to ensure that their involvement was appropriately represented. The RMS regional landfall rates were not challenged by any of the panelists. While it is now recognised that Professor Elsner has developed his own theories on how hurricane activity translates to regional landfall rates, he did not challenge the RMS landfall rates developed after the 2005 expert elicitation.

In comparing two different approaches for applying landfall rates to the state Florida, RMS analysis indicates that utilising a uniform increase (based purely on the elicitation results) over a regional increase (as researched and implemented by RMS) produces only a small variation in loss results. While the difference is small, RMS believes that regionalization is the most appropriate scientific methodology for characterizing the current state of risk.

In October 2006 RMS organised the second of these annual expert meetings on hurricane activity rates, inviting all four of the scientists involved in the first meeting. Only Professor Elsner declined, citing that he was under contract with a company affiliated with our main competitor. The second meeting involved a total of 7 climatologists, and went into greater depth than the first meeting, employing the results of 20 different statistical and climatological forecasting methods. The activity rate forecast for the next five years that came out of this meeting was almost identical - within 1-2% - of the projection of the first year's meeting.

All of the materials produced at these meetings, as well as the details of how activity rates were implemented, have been documented and are in the process of being published in peer-reviewed scientific literature.

RMS will continue to run an annual hurricane climatology expert elicitation procedure to ensure that RMS hurricane models reflect the most current view of hurricane risk. The five year perspective, may in future years, be decreased if this is suggested by the best scientific and statistical evidence available at that time.

DR. ROBERT MUIR-WOOD

Chief Research Office,

Risk Management Solutions