Risk Management Solutions, a world leader in catastrophic risk modeling, has released a new study regarding hurricanes that has sent ripples of concern throughout the insurance industry. Hurricane season is here and it is expected that several major hurricanes will form in the Atlantic Ocean on their way to Florida.
The study suggests that if even one of these hurricanes makes landfall and forces its way to the interior of the state, the damage would be unprecedented. This has caused many insurers in Florida to speculate how the report could affect insurance rates on homeowner’s policies.
The risk of hurricane damage typically dissipates as properties get further away from the coast and many living far inland believe themselves to have some sort of immunity to the storms. RMS’ report uses data collected in 2004, the year that several powerful hurricanes fought their way inland and devastated areas that were often beyond the reach of such events.
The 422-page report is expected to hold some sway on insurer’s decisions regarding new rates. Risk models are often used in such a way as they provide insurers with detailed insight on the probability of catastrophic events. They are only tools, however, and insurers consider them as one factor amongst a multitude of others when calculating rates.
The National Oceanic and Atmospheric Administration has predicted that this year’s hurricane season will be unusually active but is unable to determine whether or not hurricanes will actually reach land. Florida has avoided major hurricane incidents for six years, the last being Hurricane Wilma in 2005.