EQECAT Releases the First High Resolution Tornado/Hail Catastrophe Model

Oakland, CA

June 9, 2004

EQECAT, Inc. has announced the release of its US Tornado/Hail/Straight Wind model for assessing and managing insurance risk associated with these key natural hazard perils. The model is the latest addition to EQECAT's comprehensive WORLDCATenterprise™ catastrophe management software suite, which includes natural hazard and man-made perils in 88 countries, including US models for earthquake, hurricane, windstorm, wildfire, flood and terrorism risk.

Tornado and hail are among the most devastating natural hazards, accounting for 46 percent of all US catastrophe losses since 1949. As recorded by Property Claims Service, the industry losses from the May 3-4, 1999 events in Oklahoma were estimated to be $1.6 billion. The EQECAT model reveals that if a similar storm system were to occur in a populated area such as Dallas, Texas, the losses to insurers could exceed $11 billion.

"With the potential for multi-billion dollar insurance industry losses, EQECAT recognized the need to provide the insurance industry with a better catastrophe-modeling tool to manage this exposure," said Richard Clinton, president of EQECAT. "We believe that our new model is another example of EQECAT's technology leadership and ability to provide solutions through innovation."

Tornado/Hail Model Simulates More Events Than Legacy Models

Recent advances in weather data collection have made it possible for EQECAT to develop the first high resolution tornado/hail insurance model. Due to the extremely concentrated footprint associated with tornado touchdowns, a high resolution model is the only way to reliably quantify and manage tornado and hail risk. EQECAT's goal was to create an innovative model that would properly estimate loss potential from these severe weather systems, some of which can produce dozens and even hundreds of tornado touchdowns and hail streaks over several days. The net result is a tornado/hail model that employs 800,000 stochastic events that simulate over 20 million tornadoes and 60 million hail streaks to enable the most refined analysis of risk available.

Tornado/Hail Modeling Presents Special Challenges

"Modeling tornado and hail loss presents special challenges in the development of a refined and accurate model," said Dr. Mahmoud Khater, EQECAT's chief technology officer. "Tornado touchdowns are geographically very small and are infrequent in any one area. In addition, the overall geographic area exposed to tornado-hail risk is very large. As a result, the model must include a large number of stochastic events to accurately represent the risk to individual locations, or to highly concentrated books of business," said Dr. Khater. "Older models simply do not simulate enough events to model the risk at a refined level of detail. This causes model bias that often results in a significant underestimation of the real exposure," said Dr. Khater.

"Another challenge was to provide heightened analysis speed, despite an increase in the number of events being modeled as compared to older models," said Dr. Khater. "Fortunately, EQECAT's innovative modeling technology makes this possible. EQECAT's model can complete a detailed tornado and hail analysis for a large portfolio in less than one day, which we believe is considerably faster than legacy models," said Dr. Khater.

EQECAT, Inc. provides state-of-the-art products and services to the global property and casualty insurance, reinsurance and financial markets. EQECAT is the technical leader and innovator of catastrophe risk management models that quantify exposure to a range of natural and man-made catastrophic risks.

Through its modeling software platform, WORLDCATenterprise™, EQECAT enables clients to quantify and manage the potential financial impact of natural hazards. WORLDCATenterprise includes 181 natural hazard software models for 95 countries spanning six continents. These models are based upon innovative applications of the latest science, engineering expertise, claims and exposure data and advanced mathematics.

EQECAT, a subsidiary of ABSG Consulting Inc., was founded in 1994 and is headquartered in Oakland, California.

For more information, contact:

pr@eqecat.com

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