A company that provides much of the Bermuda insurance industry with computer models used to estimate damage from future hurricanes strongly denied an accusation in a Florida newspaper that its most up-to-date work was based on “faulty science”.

A story in yesterday's edition of the Tampa Tribune suggested that an “unscientific” assumption built into the model was allowing reinsurers and insurers to justify rate increases of up to 40 percent in some catastrophe-prone US coastal areas.

The paper based its accusations against California-based Risk Management Solutions (RMS) on quotes from Jim Elsner, a professor of geography at Florida State University.

Professor Elsner was one of four experts invited by RMS to a panel discussion in Bermuda in late 2005, convened to provide input for an updated RMS model.

But RMS spokeswoman Shannon McKay told The Royal Gazette yesterday that she understood Professor Elsner felt his concerns had been exaggerated by the Tribune and his reaction would be published today by ratings agency A.M. Best in a question-and-answer interview.

Bradley Kading, president of the Association of Bermuda Insurers and Reinsurers (ABIR), said changes to the RMS model had been made to reflect lessons learned by the industry in 2004 and 2005, years of high hurricane activity and unprecedented events.

The Tribune concluded that RMS took the consensus of experts that there would be more Atlantic storms in future and “then added its own projections about which US regions would be most affected”.

It also claimed that RMS had given more weight to a five-year “medium-term” model for 2006 to 2010 than it gave to 100 years of historical weather data.

The story stirred up a storm of its own and included an angry response from Florida Governor Charlie Crist, who said: “It almost doesn't shock me because this industry has been taking remarkable advantage of our people. Big insurance is about to face a new day in Florida.”

And Robert Hunter, a former Texas insurance commissioner now with the Consumer Federation of America, said the primary reason for the change of emphasis to the five-year model appeared to be pressure from the insurance industry.

RMS director of North American climate hazards Josh Darr told the Gazette yesterday: “Elsner may have a difference of opinion, but I think perhaps he was misrepresented in that article.

“What we did was to take the consensus of expert opinion, which was that there will be above-normal hurricane activity for the next ten to 20 years. Then we had to ask: How do we implement that into our models?

“We built upon the expert opinion using our own model and historical data and that is where Elsner may have a difference of opinion.”

He added that Professor Elsner had been invited to attend another RMS expert panel in 2006, but had been unable to attend as he was working for one of the company's competitiors.

Mr. Darr added that historical data had been taken into account in the making of the five-year model, as well as other data, such as higher than normal sea temperatures, which had been shown to increase likelihood of intense storms.

“The tone of the Tribune article was not what we would have liked to have seen,” Mr. Darr said, adding that RMS hoped that if Professor Elsner expressed concerns about the first article that the paper would publish them.

RMS, which has an office in Bermuda, boasts more than 400 insurance companies and financial institutions as clients, including most of the Island's major reinsurers.

ABIR president Mr. Kading told The Royal Gazette yesterday that RMS models were widely used in the industry in Bermuda, but much other data were used in addition.

“RMS and AIR are the leading providers of catastrophe models and the typical practice in sophisticated companies is to use both of those and use a company's own proprietary data,” Mr. Kading said.

Mr. Kading said it was his understanding that RMS had assembled several groups of experts to adjust models that had been based on long-term historical data to take into account the extraordinary events of 2004 and 2005, when a series of devastating hurricanes made landfall along the US eastern and Gulf coasts.

Insurers and reinsurers paid out an estimated $100 billion in claims in 2005 alone, due to the effects of hurricanes Katrina, Rita and Wilma.

“Based on the lessons learned from the amount of hurricane activity and the unprecedented events in those two years, it seemed that models based on historical data needed to be adjusted,” Mr Kading said.

One of those lessons was that storm surges produced on the US Gulf Coast proved to be significantly stronger than those recorded in the past, Mr. Kading said.

And the devastation caused by the hurricanes which hammered the Florida coast and continued causing wind damage across the peninsula had shown that the capacity of a storm to cause damage well inland had previously been underestimated.

Such new information had shown that relying too heavily on historical weather data was no longer the most accurate way to create hurricane loss risk models .

“What RMS has done is to try and better reflect the future frequency and severity of future storms,” Mr. Kading said. “The paradigm has shifted and the past need not foretell the future.”

The Tribune claimed that, based on the new five-year model, RMS said hurricane losses would increase by 40 percent over the Gulf Coast and 25 percent to 30 percent in the other regions.

And it quoted another of the panellists who met in Bermuda, Thomas Knutson, a research meteorologist with the National Oceanic and Atmospheric Administration as saying the five-year timeline didn't come from the experts.

“I think that question was driven more by the needs of the insurance industry as opposed to the science,” Mr. Knutson said.

The Tribune quoted RMS as having said in March that its five-year model was developed in cooperation with the expert panel that included Mr. Elsner and Mr. Knutson, and that based on their perspective: “Increases in hurricane frequency should be expected along the entire US coast, but will be highest in the Gulf, Florida, and the Southeast, while lower in the Mid-Atlantic and the Northeast.”

“I didn't make any such statement of that type,”Mr. Knutson told the Tribune. Mr. Elsner was quoted as saying he had warned RMS about flaws in the model and that RMS had exaggerated the basic science “well beyond what we expected.”