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More investment in storm research is encouraged

To the editor: Peter Bickford in his letter of Oct. 20, "Industry Should Return to Supporting Forecasts," highlights the value to the insurance and reinsurance industry of supporting research which improves the forecasting of tropical storms. He cites examples of how funds provided through the now-discontinued Insurance Friends of the National Hurricane Center have benefited the forecasting of North Atlantic tropical storms and the communication of this information to the insurance industry and to the general public. Mr. Bickford calls for the revival of an industry partnership with the U.S. National Hurricane Center.

I would like to echo and develop Mr. Bickford's comments. Recognizing the value of the very points that Mr. Bickford is making, a venture called Tropical Storm Risk was formed in 2000 to increase risk awareness and help decision-making within the insurance and reinsurance industries. TSR has developed to become a respected independent resource for forecasting the risk from tropical storms worldwide. The consortium comprises experts on insurance, risk management and seasonal climate forecasting. The TSR industry support comes from Benfield Group Ltd., the independent reinsurance intermediary; Royal & SunAlliance Insurance Group P.L.C., the insurance group; and from Crawford & Co., a provider of risk management services. The TSR scientific grouping comprises climate physicists, meteorologists and statisticians from the University College London Benfield UCL Hazard Research Centre and the Met Office. TSR funding is confirmed through to 2006.

Two examples of where modest industry funding channeled through TSR is benefiting the insurance industry are in the development of the TSR Tropical Storm Tracker and in the improvement and business application of seasonal tropical storm forecasts. The TSR Tropical Storm Tracker is a free-to-use Internet product designed to allow insurers, reinsurers and risk managers to increase their awareness of tropical storm activities and to enhance their ability to forecast more accurately the risk and loss from tropical storms around the world. The Tracker provides real-time forecasts out to five days lead for all active tropical storm systems worldwide. Forecasts are updated every six to 12 hours and offer the best available information on storm position (past, current and forecast), storm strength, track and track uncertainty, all with various levels of zoom. The product also provides unique current and forecast two-dimensional windfields to benefit the improved forecasting of windspeed loss out to 120 hours lead. The Tropical Storm Tracker information is also benefiting other organizations and the public. For example, a real-time feed between the Tracker and the Reuters Foundation AlertNet organization will be established shortly to alert humanitarian aid organizations to tropical storm-related emergencies.

Seasonal tropical storm predictions are a new and unexplored resource for the insurance industry. Confidence in their accuracy and value needs building before insurance and reinsurance executives will employ them routinely in business decisions. The integration of TSR's recent advances in seasonal forecasting into the business process demonstrates the value which such forecasts can offer insurance organizations. In collaboration with the Helvetia Patria Group, a business strategy has been developed which uses the TSR early August U.S. hurricane hindcasts 1950-99 to decide whether to buy or sell retrocessional U.S. hurricane insurance cover. Results show that, over this 50-year period, the forecast-based approach is up to 40% more efficient in terms of cost-to-recovery ratio than traditional insurance strategies which either always buy cover or always sell cover. This first demonstration of the business value of seasonal hurricane forecasts has been achieved solely through modest financial support from the insurance industry.

Further sound and useful developments in forecasting tropical storms can be anticipated. This is true particularly for the U.S. and Caribbean sector but also for territories in the Far East and Australia. The insurance industry stands to gain through improved risk awareness and business value. Like Peter Bickford, I encourage other companies to follow the lead of those who supported the Insurance Friends of the National Hurricane Center and who are supporting the TSR venture and to make a small investment which will benefit your own company but also the industry and society in general.

Mark A. Saunders

University College London

Benfield UCL Hazard Research Centre

London