Therefore, insurers should have a better idea of expected claims when the next big one hits.

Hurricane predictions have come under fire for their perceived inaccuracies. Could these false alarms create a lull that keeps insurers from effectively preparing for disasters?

What matters is whether hurricanes make landfall, and the point of landfall. One major hurricane that makes landfall in an area where there is a high concentration of exposure is far more relevant to insurers than numerous hurricanes either not making landfall or making landfall where there are low concentrations of exposure.

The predictions are successful in the sense that they raise public awareness and encourage preparedness. There is a danger that the annual publicity surrounding the season's predicted level may cease to be effective in raising awareness if the public were to perceive an element of “cry wolf” creeping in. Even if the activity level is accurately forecasted but there isn't much impact in the U.S. because of few land-falling storms, the public may still interpret the annual predictions as false alarms. In turn, the forecasts become less effective in encouraging public awareness and preparedness.

What proactive measures can insurers take to prepare for a hurricane strike?

To link back to a previous answer and reiterate — one important proactive measure is monitoring exposure accumulations. Insurers need accurate information to write each policy. It is also crucial for them to have accurate exposure information about their whole portfolio, so as to avoid over-exposure in any particular area. Insurers must be confident in their risk measurement and ability to measure potential loss aggregation.

To retain their ability to pay claims, insurers need to keep their exposures in any one particular area to acceptable levels. Insurers monitor their exposure accumulations, and accurate data is crucial to this. The industry exists to give people peace of mind that, if disaster hits, they will be covered. It is important that claims be paid, and in a timely manner, so that individuals and businesses can survive.

Another important proactive measure is encouraging policyholders to take preventative action to maintain their properties. For example, pre-hurricane season evaluations of policyholders' properties can check for repairs that would magnify the impact of a storm.

Have technology snafus from Katrina been adequately addressed?

The technology issues encountered during Katrina impacted a range of services. During a recovery operation for an event like this, financial institutions and the like must compete with local or state agencies and emergency services to restore technology infrastructure.

Examples of issues encountered during Katrina were difficulties in locating personnel because of communication outages; inoperable computer systems because of a lack of electrical power; and back-up sites that were not a sufficient distance from the primary site. There have been a number of initiatives to improve the response next time around. One example is the research published by the Federal Deposit Insurance Corporation about the lessons learned from Katrina to assist financial institutions in preparing for the future. Another is the Federal Financial Institutions Examination Council updating its guidance regarding business continuity planning from an IT perspective.

However, an essential lesson from Katrina really was to expect the unexpected. Even though businesses had disaster recovery plans in place, the magnitude and duration of the event had not been foreseen, so these plans had to be adjusted on-the-fly.