North Atlantic Hurricane

Hurricanes are a significant source of catastrophe risk throughout the North Atlantic Basin, including the United States, Bermuda, Canada, the Caribbean, Mexico, and Central America. The (re)insurance industry must effectively quantify, differentiate, and manage tropical cyclone risk accurately at the local level through to portfolio management, reinsurance, and capital management decisions. The Moody's RMS® North Atlantic Hurricane Models enable these applications, simulating realistic events throughout the region using a basin-wide event methodology, capturing the impacts of wind and storm surge for a variety of landfalling, bypassing, and transitioning storms.

The North Atlantic Hurricane Models have been well validated by thousands of wind and storm surge observations, over US$300 billion in industry loss data, and more than US$27 billion of location-level claims and exposure data (including Hurricanes Katrina, Ike, Sandy, Harvey, Irma, and Maria, and Michael) spanning more than 25 years. In addition, the underlying model assumptions and methodologies have been extensively reviewed by numerous third-party experts. Moody's RMS also incorporates the latest market practices and building codes for each region.

The North Atlantic Hurricane Models support effective risk differentiation and selection decisions down to the local level within and across regions. The models incorporate high-resolution satellite data (up to 15 meters), reflecting up-to-date land use and land cover information. This provides a realistic representation of local variations in wind hazard due to frictional impacts such as surface roughness, which is particularly important in urban areas with high concentrations of buildings.

The vulnerability module enables deeper and more accurate insights into risk differentiation for underwriting and managing hurricane risk. It includes unique functions representing regional vulnerability and over 1,750 combinations of primary characteristics for wind- and water-based sub-perils (storm surge for onshore risks and wave for offshore risks).

Utilize the models' basin-wide event methodology to assess key drivers of risk to support portfolio growth and diversification strategies. The U.S. component is linked with the Moody's RMS U.S. Inland Flood HD Model, providing the means to develop a complete view of wind, storm surge, and tropical cyclone precipitation-induced flooding in one place.

Underlying track and inland filling methodologies capture tropical cyclone characteristics throughout the full storm life cycle, reflecting the reality of how storms weaken as they lose energy over water or weaken post-landfall. This provides confidence for the market to underwrite inland hurricane risk, including the risk associated with transitioning storms.

Moody's RMS integrates a hydrodynamic, time-stepping storm surge solution into our hurricane models to capture the complex interactions between wind and waves throughout the life cycle of a tropical cyclone. This comprehensive model solution simulates surge buildup at sea, accounting for changes in a storm’s size and intensity prior to landfall and the dynamic flow of water around complex coastlines.

With an accurate, high-resolution representation of hurricane-driven coastal flooding, (re)insurers can manage, select, and underwrite risk with more confidence, right down to the street   level, and better understand portfolio-wide tail risk driven by storm surge.

Moody's RMS is the only modeling company to provide a five-year forward-looking view of annual hurricane landfall frequency throughout the North Atlantic Basin. Separate from the long-term historical rates, the medium-term rates consider both current and projected near-term climate trends and represent the Moody's RMS default view of event frequency. Multiple views of event frequency allow (re)insurers to understand model sensitivities to hurricane risk across different timescales and ultimately select the view that best aligns with their view of risk.

The North Atlantic Hurricane Models come with extensive and detailed model documentation, including resources that are specific to supporting Solvency II validation.  This allows Moody's RMS to provide unprecedented transparency and support into various aspects of the models, including methodologies, validation, and change management.