Hurricane Risk Modeling;
"Beyond the 100-year rain/flood"

Thomas A. Schroeder Joint Institute for Marine and Atmospheric Research (JIMAR)and Department of Meteorology

Abstract

Beginning in the mid-1980's a new industry has developed. The products are catastrophe risk models for extreme events. Originally targeting earthquakes and tropical cyclones ( hurricanes for U.S. interests), the models have branched into man-made hazards such as terrorism. The primary customer is the insurance industry, though Federal agencies have acquired similar models ( HAZUS). The primary issue faced in these efforts is the lack of actual detailed observations of extremely rare events. The methodology used to estimate the frequencies and consequences of these events differs from standard actuarial approaches.

I shall describe the elements of a hurricane risk model, contrast this type of model to the rain and flood estimations used by hydrologists and engineers, and discuss the intense regulatory environment associated with this industry. The risk modeling industry and the insurance industry are international enterprises. Hawaii is a small player in the global scheme but feels the impacts of decisions made nationally and internationally.