Risk Management Solutions Inc has launched its new catastrophe risk model to reflect the higher frequency and severity of hurricanes. The latest version of the RMS (R) US Hurricane Model is the first to incorporate a five-year forward looking view of hurricane frequency. It also takes into account claims research and analysis of building performance as well as an expanded methodology to asses amplified losses that occur in severe catastrophes such as Hurricane Katrina.

Founded at Stanford University in 1988, RMS is one of several providers of products and services for the quantification and management of catastrophe risks which has moved to update its models in light of the increased storm activity. It is the only one however which has an actual office in Bermuda and at the time Hurricane Katrina wreaked havoc, it counted some two dozen Bermuda-based insurers and reinsurers as clients.

The latest model with version 6.0 RiskLink(R) and RiskBrowser(R) risk management platforms, includes updates to the US and Caribbean Hurricane models, Eastern US and Eastern Canada Earthquake models, and a Europe Windstorm model and provides a new view of hurricane frequency in the Atlantic Basin that explicitly represents risk based on a ?medium-term? or five-year forward-looking view.

Current hurricane risk is best represented by land falling hurricane activity rates that are higher than historical and likely to persist for at least the next five years, according to RMS research on climate variability, climate change, historical hurricane activity patterns, and hurricane clustering research including the expert opinion of a panel of hurricane climatologists.

The new model includes analysis of the world?s largest compilation of hurricane claims and exposure data which RMS gathered after the hurricanes of 2004 and 2005. It combines advanced modelling techniques with in-house research on storm behaviour and building, contents, and time element vulnerability to accurately simulate the potential range of damage an insurer can expect to experience due to a hurricane event. Wind and storm surge losses are calculated using enhanced vulnerability assessment facilitated in large part by the collection of $13 billion in insurance claims data from the 2004 and 2005 hurricane seasons, as well as new analytical assessments of building performance.

?These simultaneous analysis efforts have significantly improved the accuracy of risk assessments by allowing for greater differentiation and more precise estimation of various classifications of hurricane risk,? said Phil LeGrone, director of claims research at RMS.

The hurricanes of 2004 and 2005 also provided RMS with insights into the amplification of insured losses in severe catastrophes due to economic causes beyond wind and water damage. The new model incorporates amplification by assessing factors such as economic demand surge, claims adjustment and inflation, the economic impact of reconstruction, and cascading catastrophes that can occur in major metropolitan areas. ?Hurricane Katrina has prompted further research and understanding on how one high-impact event can create a cascade of far more damaging consequences. A whole new tier of economic, behavioural, and systems- based modelling is required to predict the losses in such Super Catastrophes,? said Dr. Robert Muir-Wood, chief research officer at RMS.