Insurers should set rates with heavy 2007 storm system in mind

Insurers and reinsurers can expect a worse hurricane season in 2007 than in 2006, and should set their rates accordingly, Omega Insurance Holdings CEO Philip H. Cook predicted at the CIP Society-Toronto Chapter’s PROedge Industry Trends Breakfast Series in Toronto.
In his annual speech, Cook identifies industry trends, reviews his predictions from the previous year, and makes predictions for the industry going forward. He made 20 predictions for 2007, including a worsening storm season.
“I do believe we’ll have a worse hurricane season in 2007 than in 2006,” Cook said, adding his prognostication was derived from reading scientific reports that drew the same conclusions. “Although they were the same [scientists] saying that 2006 was going to be very bad, they have all the reasons why it wasn’t and all of the reasons why 2007 will be.
“So I think we can assume there will be a worse hurricane season. And frankly I think that, as an industry, we should be anticipating that in our ratemaking for this year.
“There’s no point in getting to a point in the latter part of the year, and saying, ‘Oops, we shouldn’t have done that [i.e. set rates too low].'”
Cook told his audience at the National Club that Europe’s Kyrill windstorms in early January 2007 have already caused an estimated US510 billion in damages. And this is still very early in the winter storm season, he noted.
Cook acknowledged that none of the storm models predicted the absence of any major hurricanes to reach U.S. landfall in 2006. Nevertheless, he said the models were “right on” when it came to predicting the correct number of tropical storms in 2006 (16-18).
This year, forecaster Tropical Storm Risk (TSR) has predicted 16 tropical storms for the Atlantic basin as a whole, with nine of these being hurricanes and four intense hurricanes.