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05

Insurance industry 'should expand focus on hurricane risk'

Open-access content Wednesday 30th May 2012 — updated 7.35pm, Wednesday 6th May 2020

The insurance industry should consider atmospheric and remote influences as well as sea surface temperature when modelling hurricane risk, the Met Office said today.

Tornado damage SHUTTERSTOCK

30 MAY 2012 | THE ACTUARY NEWSDESK: NICK MANN

Analysis published by the Met Office in conjunction with Lloyd's shows insurers how to reduce their overall exposure to hurricane risk by understanding different views from the market norm.

In particular, it explores how atmospheric climate and oceanic conditions influence the formation of powerful storms and what drives them to make landfall. Landfalling hurricanes in the US are the costliest of all natural hazards, with Hurricanes Katrina, Wilma and Rita costing an estimated $90bn.

The analysis,Hurricanes and Long-term Climate Variability, uses the latest research papers from a number of leading organisations, including the Met Office and the National Oceanic and Atmospheric Administration, to develop understanding on what drives changes in hurricane landfalling risks by examining the underlying physical causes. Its authors believe doing so will help to validate some commonly used statistical relationships and potentially find others.

Neil Smith, manager for emerging risks at Lloyd's said: 'This study adds to the existing body of research on hurricane risk. It should help support and improve insurers' understanding of the risk, and play an important role in helping them manage their exposures and mitigate their potential losses.'

Dr Leon Hermanson, senior research scientist at the Met Office, added: 'As understanding grows, the phenomena highlighted in the study are likely to feature more in the models used by insurers and scientists to predict hurricane activity and their potential impact.

'There is still a considerable amount of uncertainty in the science linking hurricanes and climatic and oceanic phenomena, but scientific understanding is growing quickly.'

This article appeared in our May 2012 issue of The Actuary.
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