Karen Clark & Company Announces New Executive Briefing on Hurricane Models

BOSTON, MA, April 4, 2011

Karen Clark & Company, independent experts in catastrophe risk, catastrophe models and catastrophe risk management, today announced a new Executive Briefing, "Nearly Twenty Years Since Hurricane Andrew—How Can the Models Change So Much?" The Briefing, an in-person presentation provided to insurance company senior executives and Boards of Directors, addresses issues of concern regarding recent changes to models designed to project insured hurricane losses in the United States. It also addresses what other information insurance companies should examine to understand catastrophe risk, and whether rating agencies will require use of new models.

Karen Clark & Company developed the Briefing in response to specific concerns in the insurance industry regarding the new U.S. Hurricane Model released in February by Risk Management Solutions (RMS). The model, which RMS termed a "major upgrade," has produced PML changes of more than 100 percent for some companies, including many in Florida, and as a result is sending shockwaves through the industry

"We have received numerous inquiries about whether companies should implement the new RMS model," said Karen Clark, President and CEO, Karen Clark & Company. "Of course, the short term answer is 'No.' If a model changes so dramatically from one version to the next, and radically alters your risk management decisions, you’ve got to pause, test the new loss estimates for credibility, and figure out how much credence you want to give to a tool with so much inherent volatility."

The Executive Briefing addresses the questions many insurance executives now have regarding the RMS model, and modeling in general, including:

How can a hurricane model change so much? How much of the volatility in loss estimates is due to scientific unknowns versus actual scientific knowledge? How can I test the new model and loss estimates for credibility? How much confidence should I place in the models going forward? What other information can I use to quantify and manage catastrophe risk?

The Briefing will be conducted by Ms. Clark, the leading authority on hurricane risk and hurricane models. In 1987, she created the first hurricane catastrophe model and founded the first catastrophe modeling company, Applied Insurance Research (AIR), now AIR Worldwide. Ms. Clark launched Karen Clark & Company in 2007 to help companies collect better data and better use catastrophe models as tools for making important risk management decisions. In addition to extensive knowledge of hurricane models, Ms. Clark has the unique ability to translate the scientific jargon inherent in modeling into language non-scientists can understand.

The Executive Briefing can be delivered to CEOs and Boards in one hour, and a longer, more detailed version, is available for presentation to technical staff. For more information on Karen Clark & Company Executive Briefings,