A leading catastrophe modeling executive has warned property/casualty claims professionals they face a 5% chance of losses greater than the $58bn from Hurricane Katrina in 2006.”
In her keynote remarks at the 2006 PCS Catastrophe Conference, Karen Clark, president and CEO of AIR Worldwide Corp also predicted catastrophe losses “will double about every 10 years due to increases in the numbers and values of properties at risk.”
While scientists may debate whether warming sea surface temperatures that influence hurricane activity are cyclical or a long-term trend, “the main driver of catastrophe losses is exposure growth.”
The head of AIR noted aggregated commercial and residential replacement costs have more than doubled in the United States over the past 10 years. “Changes in the cost per square foot of residential buildings are up 40% nationwide.” she said.
Moreover, a catastrophe event resulting in insured losses exceeding $100bn “is not hard to imagine,” said Clark. She cited the possibility of a major storm making a direct hit on Miami or sweeping through northern New Jersey, New York, Long Island and New England.
Andrew Castaldi, senior vice president, Swiss Re, said catastrophe modeling has helped the industry cope with record-setting catastrophe losses. Though relatively new, catastrophe modeling technology has proven itself an important tool in minimizing the economic impact of major hurricanes, he said.
