Earlier in August, two catastrophe modeling companies, AIR and RMS released new earthquake models for North America

Karen Clark & Company, a provider of software products and consulting services to insurance companies, has announced a new Executive Briefing – Implementing the New U.S. Earthquake Models: Look Before You Leap, which provides guidance on how to interpret and use the new earthquake models.

In early August, the two major catastrophe modeling companies, AIR and RMS, within a day of one another released new earthquake models for North America. The new model versions, based partly on the 2008 USGS National Seismic Hazard Maps, produce significantly reduced loss estimates for most regions of the US.

While the amount of reduction varies by model, by region, and by type of business, most companies with significant earthquake exposure will see large reductions in their model loss estimates. Implemented as is, these changes will have major implications for company risk management decisions, including earthquake underwriting, pricing, and reinsurance purchasing.

Karen Clark, president and CEO of Karen Clark & Company, said: “Any company that implements a new model without thoroughly testing and understanding what’s behind it is committing modeling malpractice. This Executive Briefing brings more transparency to the science underlying the new earthquake models, and helps companies enhance their risk management decisions by going beyond point estimates derived from models with such obvious and wide uncertainty.”

Karen Clark & Company provides software products and consulting services that help insurance companies evaluate and improve their exposure data processes, to better understand catastrophe risk, and to more effectively utilize models and model results.