Wednesday, 5 May 2004: 4:15 PM
The business benefit of seasonal US landfalling hurricane forecasts from 1 August
Le Jardin Room (Deauville Beach Resort)
We assess the business benefit of the TSR (Tropical Storm Risk) seasonal US landfalling hurricane wind energy hindcasts for the retrocessional buying and selling of hurricane cover within the reinsurance industry. The TSR hindcasts from 1 August are linked significantly (p = 0.01) to US hurricane insured losses 1950-1999. We show that a business strategy which uses the TSR early August US hurricane hindcasts 1950-1999 to decide whether to buy or sell reinsurance cover 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. To our knowledge this is the first demonstration of the business benefit of a seasonal hurricane forecast.
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