Catastrophe models will continue to be exposed by events like Superstorm Sandy because they can fail to contemplate all possible sources of loss, says Lockton Cos.
A report by Jeff Tennis, manager of catastrophe analytics at Lockton, says model deficiencies are visible “particularly for areas with a limited historical record,” but he adds it “would be naïve to fully discredit” these loss-prediction tools.
Tennis suggests simulations using the hurricane model by Risk Management Solutions (RMS) were not lacking in that the firm modeled 2,300 storms in the area where Sandy hit and 62 storms produced storm surge of 16-feet or greater—the surge height in some areas during Sandy, such as on Staten Island, N.Y.
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