26 October 2010

The 2006-2010 RMS Hurricane Damage Forecast

Periodically on this blog I have discussed the 2006-2010 hurricane damage forecast that was issued by Risk Management Solutions, a leading catastrophe modeling firm.  As we approach the end of the 2010 hurricane season we are close to being able to offer a definitive evaluation of that forecast. You can see where things stand as of today in the graph above.  (All data is from the ICAT Damage Estimator, total damages shown.)

I will have a series of posts on the RMS forecast and its significance closer to the end of November. The forecast and its evaluation provide some very important lessons for catastrophe risk management, for the role of cat modeling firms in financial services and for the science of extreme events.  Meantime, those interested in a bit more background might have a look at this paper:

Pielke, Jr., R.A., 2009. United States hurricane landfalls and damages: Can one-to five-year predictions beat climatology?, Environmental Hazards, Vol. 8, pp. 187-200.


  1. Roger - is there a simple answer why they forecast nearly 50% higher? How much, crudely, was weather climate and how much real asset prices being higher?

  2. -1-Roddy

    The answer has to do with projected changes in storm behavior distilled from the expert elicitation methodology that I describe in the paper linked in this post. It has nothing to do with asset prices.

  3. Think of the profit represented by a graph like this. You set rates based on the RMS prediction at a high level but coverage expense is based on the actual damages. Is the difference between the green line and the blue line an indication of a large profit margin by Munich Re? Does the insurance industry have a vested interest in being a chicken little?

  4. -4-Sean

    One of these days I'll post up a timeline of the IPCC AR4 drafting schedule in relation to the disasters issue, and compare that to the RMS hurricane forecast. They overlap, and the same person was apparently responsible for each. Then we can discuss possible COI.