At the start of December a pair of forecasters at Colorado State University kicked off the 2010 hurricane prognostication season with a call for an above-average hurricane season in the Atlantic. A year prior, the same team predicted 14 named storms, seven hurricanes and three major hurricanes for 2009. The 2009 hurricane season ended November 30 with nine named storms, only three of them hurricanes, in the Atlantic. These were the lowest totals since 1997. No hurricanes reached the U.S. mainland.

At the start of the 2009 hurricane season in June, the researchers at Colorado State lowered projections to 11 named storms, five of which were to become hurricanes. This caused some in the insurance industry to question the value of advance predictions for hurricane season. A.M. Best’s Best Week talked with industry experts. Bottom line: forecasts are useful for seeing trends, but not useful for setting insurance rates.

Karen Clark, a pioneer in the catastrophe-modeling field and president of Karen Clark & Co. recently released an analysis of near-term hurricane models and found they “do not have sufficient credibility to be used for important insurance applications such as product pricing and establishing solvency standards.” “There needs to be a deeper understanding of the inherent uncertainty in modeling,” Clark said. “This means real money to real people.”

February 2, 2010