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Risk Modeling Firm Predicts 1-in-3 Chance of 'Large Hurricane Catastrophe-Losses' in '05

While Tropical Storm Arlene failed to develop into a significant storm such as Hurricane Ivan in 2004, a review of hurricane trends show that there is more than a one in three chance of large hurricane catastrophe-losses in the United States in the current season, according to EQECAT Inc., an extreme risk modeling firm.

The company said Wednesday that it made its projections based upon current forecasts by the National Hurricane Center (NHC), which has suggested 2005 is likely to be an "above average" year.

"Although the current season might not be as severe and unusual as the 2004 season, the potential for large losses in 2005 is likely to be troubling to insurers and reinsurers, which will have to cover the potential hurricane damage claims," said Tom Larsen, senior vice president of EQECAT.

The most recent forecasts by NHC have suggested 12 to 15 named storms are expected for 2005, with seven to nine becoming hurricanes, and three to five expected to be major hurricanes. The number of storms anticipated for 2004 was 12 to 15 and the number of hurricanes expected were six to eight. The actual number of storms in 2004 was 15, with nine of them hurricanes.

EQECAT pointed out that the most recent NHC forecast also suggested the accumulated cyclone energy (ACE) index of storms in the current season will be between 120% and 190% of the median value.

"The forecast 2005 ACE index is similar to the ACE Index for 12 other years since 1950, among which four seasons resulted in very large losses," Larsen added. "The 12 years with ACE values between 120% and 190% of the median included some seasons with severe and costly storms, such as Hazel, Carol, and Edna, all in 1954; Camille in 1969; Allen in 1980; and Hugo in 1989."

Founded in 1994, EQECAT is headquartered in Oakland, CA.

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