Peak Cheap . . . Sand

[don]

By CORNELIA DEAN

For more than a century, for good or ill, New Jersey has led the nation in coastal development. Many of the barrier islands along its coast have long been lined by rock jetties, concrete sea walls or other protective armor. Most of its coastal communities have beaches only because engineers periodically replenish them with sand pumped from offshore.

Now much of that sand is gone. Though reports are still preliminary, coastal researchers say that when Hurricane Sandy came ashore, it washed enormous quantities of sand off beaches and into the streets — or even all the way across barrier islands into the bays behind them.

But even as these towns clamor for sand, scientists are warning that rising seas will make maintaining artificial beaches prohibitively expensive or simply impossible. Even some advocates of artificial beach nourishment now urge new approaches to the issue, especially in New Jersey.

The practice has long been controversial.

Opponents of beach nourishment argue that undeveloped beaches deal well with storms. Their sands shift; barrier islands may even migrate toward the mainland. But the beach itself survives, because buildings and roads do not pin it down.

By contrast, replenishment projects often wash away far sooner than expected. The critics say the best answer to coastal storms is to move people and buildings away from the water, a tactic some call strategic retreat.

Supporters of these projects counter that beaches are infrastructure — just like roads, bridges and sewer systems — that must be maintained. They say beaches attract tourists and summer residents, conferring immense economic benefits that more than outweigh the costs of the projects. Also, they argue, these beaches absorb storm energy, sparing buildings inland.

New Jersey has embraced this approach with gusto. Stewart C. Farrell, a professor of marine geology at Stockton College of New Jersey, said that since 1985 80 million cubic yards of sand had been applied on 54 of the state’s 97 miles of developed coastline: a truckload of sand for every foot of beach.

Dr. Farrell and his colleagues have calculated that the work cost more than $800 million — before adjusting for inflation.
Typically, the federal government pays 65 percent of the cost; the state and towns share the rest.

By now in New Jersey, most beaches “are engineered dikes,” said Thomas Herrington, a professor of ocean engineering at the Stevens Institute of Technology in Hoboken, who has been working with the state to assess its coastal protection. About half of its coastal communities have projects still under way, so their beaches are already approved — at least in theory — for topping up with sand as needed.

But even if there is money for that work, engineers must find the sand. Around the nation, that is getting more and more difficult. The problem is particularly acute in New Jersey.

“We know from geological surveys — and New Jersey is a prime example — that offshore sand, high-quality sand, is a highly finite resource,” said S. Jeffress Williams, a coastal scientist with the United States Geological Survey and the University of Hawaii.

Underwater ridges of sand lie offshore, but engineers must go farther and farther (and spend more and more) to find them, Mr. Williams said, adding that eventually “it is not going to be there.”

And while it is theoretically possible to replenish a beach with material mined inland, that approach would create other problems, said Robert Young, a coastal geologist who directs the program for the study of developed shorelines at Western Carolina University. “Trucks full of sand weigh a lot,” he added. “There is a tremendous toll on highway infrastructure.” And excavating inland sand “would create holes that would be miles in diameter.”

Howard Marlowe, a prominent advocate of replenishment projects, agrees that the nation needs “a better way of managing short supplies of sediment.”

Mr. Marlowe is president of Marlowe & Company, a lobbying concern that represents many Atlantic and Pacific coastal communities. He said in an interview that sand supplies should be managed “holistically” — and on a regional basis, not town by town, as is now largely the case.

Managers should look at inlets, ports and the Intracoastal Waterway, as well as offshore sand sources, Mr. Marlowe said, adding, “You have to have an interstate approach.”

That is particularly true in New Jersey, he said, because towns in New York and Delaware also often find themselves on the hunt for sand. Elsewhere in the country, towns feud over who is entitled to offshore sand. Towns in Florida have gone to court over the issue.

Avalon, N.J., about 20 miles north of Cape May, looks to Townsends Inlet north of town for its sand, according to Harry deButts, who retired in 2008 as the town’s director of public works and now works part time on its emergency management efforts. He said Avalon shares that sand with Sea Isle City, the town across the inlet.

Mr. deButts said the Army Corps of Engineers dredged about 450,000 cubic yards of sediment from the inlet in 2003, and applied “a couple hundred thousand cubic yards” more about five years later. The town is scheduled to receive more sand in December, to repair damage from Hurricane Irene last year.

He said “the beaches did their job” during Hurricane Sandy, saving buildings in Avalon from flood damage. The town had built a dune more than 20 feet high, adopting what he called “an education program” to explain the advantages of second-floor living rooms to residents whose views were blocked.

That can be a hard sell. In Harvey Cedars, on Long Beach Island, homeowners have sued for compensation over loss of ocean views because of a proposed project. The case is before the New Jersey Supreme Court.

Where artificial beaches failed to protect their communities, it was probably because “this storm just exceeded the design conditions,” said Dr. Herrington, of the Stevens Institute, who has been working with the state to assess coastal protection. Typically, he said, projects in New Jersey are engineered to withstand the kind of storm that on average occurs only once every 75 years.

But as the climate warms, sea levels are rising and bad storms may come more frequently. And New Jersey is particularly vulnerable because of tectonic forces and changes in ocean currents.

When the glaciers retreated about 15,000 years ago, land in the region bounced up; now it is sinking again. Meanwhile, ocean circulation patterns are changing in ways that push water up against the mid-Atlantic coast.

“We cannot sustain the shoreline in the future as we have in the past,” said Mr. Williams, of the Geological Survey. “Particularly from a beach nourishment standpoint.”


http://www.nytimes.com/2012/11/06/sc...ted=print&_r=0

[cjppjc]

Re: Peak Cheap . . . Sand

http://news.yahoo.com/study-nj-beach...--finance.html


Study: NJ beaches 30-40 feet narrower after storm





SPRING LAKE, N.J. (AP) — The average New Jersey beach is 30 to 40 feet narrower after Superstorm Sandy, according to a survey that is sure to intensify a long-running debate on whether federal dollars should be used to replenish stretches of sand that only a fraction of U.S. taxpayers use.

Some of New Jersey's famous beaches lost half their sand when Sandy slammed ashore in late October.

The shore town of Mantoloking, one of the hardest-hit communities, lost 150 feet of beach, said Stewart Farrell, director of Stockton College's Coastal Research Center and a leading expert on beach erosion.

Routine storms tear up beaches in any season, and one prescription for protecting communities from storm surge has been to replenish beaches with sand pumped from offshore. Places with recently beefed-up beaches saw comparatively little damage, said Farrell, whose study's findings were made available to The Associated Press.

"It really, really works," Farrell said. "Where there was a federal beach fill in place, there was no major damage — no homes destroyed, no sand piles in the streets. Where there was no beach fill, water broke through the dunes."

The beach-replenishment projects have been controversial both for their expense and because waves continually wash away the new sand. The federal government picks up 65 percent of the cost, with the rest coming from state and local coffers.
How big the beaches are — or whether there is a beach at all to go to — is a crucial question that must be resolved before the summer tourism season. The Jersey shore powers the state's $35.5 billion tourism industry.

But the pending spending showdown between congressional Republicans and Democrats could make it even harder to secure hundreds of millions of additional dollars for beach replenishment.
From 1986 to 2011, nearly $700 million was spent placing 80 million cubic yards of sand on about 55 percent of the New Jersey coast. Over that time, the average beach gained 4 feet of width, according to the Coastal Research Center. And just before the storm hit, the U.S. Army Corps of Engineers awarded nearly $28 million worth of contracts for new replenishment projects in southern New Jersey's Cape May County.

U.S. Sen. Tom Coburn, an Oklahoma Republican, used a photo of a pig on the cover of his 2009 report "Washed Out To Sea," in which he characterized beach replenishment as costly, wasteful pork that the nation could not afford.

"Taxpayers are not surprised when they learn how Congress wastes billions of dollars on questionable programs and projects each year, but it may still shock taxpayers to know that Congress has literally dumped nearly $3 billion into beach projects that have washed out to sea," he wrote.

A message seeking comment was left Monday with Coburn's office.

U.S. Sen. Robert Menendez, a New Jersey Democrat, predicted lawmakers from New Jersey and New York would be able to get additional shore protection funds included in the next federal budget, despite partisan wars.

"I think we will be able to make the case," he said. "We can show that this provides long-term protection to property and lives. You can either pay up front to keep on top of projects like this, or you can pay on the back end" through disaster recovery funds.

Menendez this week noted that Congress has approved emergency recovery funds for victims of Hurricane Katrina and tornadoes in Missouri, among other natural disasters.

During a tour of storm-wrecked neighborhoods in Seaside Heights and Hoboken, Vice President Joe Biden also vowed the federal government would pay to rebuild New Jersey.

"This is a national responsibility; this is not a local responsibility," Biden said. "We're one national government, and we have an obligation."

[GRG55]

Re: Peak Cheap . . . Sand

...U.S. Sen. Robert Menendez, a New Jersey Democrat, predicted lawmakers from New Jersey and New York would be able to get additional shore protection funds included in the next federal budget, despite partisan wars.

"I think we will be able to make the case," he said. "We can show that this provides long-term protection to property and lives. You can either pay up front to keep on top of projects like this, or you can pay on the back end" through disaster recovery funds...

Or you can tell people to stop building houses on the flood plains.

Dredging sand offshore and pumping the slurry to create man made barriers is not only incredibly energy intensive, it's basically subsidizing stupidity...

[Ghent12]

Re: Peak Cheap . . . Sand

Or you can tell people to stop building houses on the flood plains.

Dredging sand offshore and pumping the slurry to create man made barriers is not only incredibly energy intensive, it's basically subsidizing stupidity...

No, I have an idea. Let's let government cover the rebuilding costs associated with coastal development. Let's also not charge the coastal property owners anything for this insurance. Yeah, that sounds like a good idea...

[cjppjc]

Re: Peak Cheap . . . Sand

Or you can tell people to stop building houses on the flood plains.

Dredging sand offshore and pumping the slurry to create man made barriers is not only incredibly energy intensive, it's basically subsidizing stupidity...

No, I have an idea. Let's let government cover the rebuilding costs associated with coastal development. Let's also not charge the coastal property owners anything for this insurance. Yeah, that sounds like a good idea...

Now which of these two plans can the voters count on?

[Thailandnotes]

Re: Peak Cheap . . . Sand

What makes people think coastal property owners don't pay anything for insurance? 8 out of 10 of the most expensive hurricanes have hit the US since 2004. Insurance companies are firm believers in global warming and in increasingly powerful weather events. They have been getting out of coastal insurance and thereby driving up insurance prices for almost a decade. Coastal policies have gotten longer and longer, mostly detailing what kinds of damage will not be covered.

5-6 Million homeowners get insurance through the federal government. They constitute a small percentage of coastal dwellers. Most are in Texas or Florida. True, the premiums the government collects only brings in about half of what is paid out, and true, taxpayers have been on the hook, but all of FIRE (mortgage, real estate, and insurance companies) lobbies to keep the federal premiums low. God forbid, builders be on the hook, as is the case in Chile.

[flintlock]

Re: Peak Cheap . . . Sand

Same old story. The owners of coastal property dont share their huge gains made in RE, but expect us all to share the risks. There was a reason beaches were not built on in the 19th century and places like the Florida Panhandle were virtually unpopulated. The risks were well known even before wold tales of global warming.

[c1ue]

Re: Peak Cheap . . . Sand

Indeed - all respectable research to date clearly attributes the vast majority (95%+) of 'climate change' damage to people moving into vulnerable areas.

And even then, it is unclear if it was 'climate change' responsible or merely decadal/century/millenia cycles of natural weather.

[Thailandnotes]

Re: Peak Cheap . . . Sand

PHILADELPHIA - November 22, 2012 (WPVI) --

In the documentary "Shored Up," scientists warn that with a rising sea level, a major storm could put New Jersey's barrier islands underwater and create devastating storm surges. In other words, what happened last month when Superstorm Sandy slammed into New Jersey and New York.

For Ben Kalina, the Philadelphia filmmaker who was nearly finished putting together the documentary when the storm hit, it meant that the ideas in the film that may have sounded far-fetched - or at least, discussions of something that may happen sometime in the future - were suddenly immediate.

"Until Sandy, we were making a film about something much more meditative, really," Kalina said. "And now the stakes are suddenly much more real."

It also meant Kalina and his crew had more shooting to do, revisiting places they'd shot - some of which were wiped away by Sandy.

That again pushed back the completion date for a film he'd been working on for three years. He's now planning to finish the film in January. It's an independent effort that he is hoping will be shown on television. He is also planning to hold screenings, particularly in the places featured in the movie, such as New Jersey's Long Beach Island.

Kalina, 36, is not a scientist, but he's fascinated by telling the stories from science by looking at the cultural and political implications, too. He worked on "A Sea Change," about the state of the world's oceans, and "After the Cap," a look back at the Gulf oil spill of 2010, among other films.

He became interested in the state of barrier islands after reading an article about how surfers opposed beach replenishment projects on the New Jersey shore.

The story became broader than that, evolving into a look at the way shore areas are developed and protected through means like jetties and beach replenishment projects. As more structures are built on barrier islands, he said, more has to be done to protect them. "Once you decide to settle in a place that's so fraught, all the decisions you make have consequences and more consequences," he said.

The solutions can be expensive, and Kalina says, not sustainable.

"Beach replenishment is not going to save the day," he said. "You get this sense of security from beach replenishment that's a false sense of security in the long run."

The film uses animation, interviews with scientists, footage of storms past and some dramatic policy debates to tell the story.

Kalina started out focusing on New Jersey's Long Beach Island, but also traveled to North Carolina. There, officials decided this year to use historical trends to build their expectations for oceanside building codes and land-use decisions rather than the more rapid sea-level rise that many scientists now expect.

The filmmaker, who grew up going to family homes on Martha's Vineyard, said the ideal time to address these how best to develop vulnerable coastlines would be before a major storm, not after one.

The irony is that nothing can draw attention to the issue like a storm.

"It's a window of time when people have actually just witnessed the destructive force of nature," he said. "There are very few windows like that."

And it could also be a window for his movie.

Before the storm, when he talked about it in his neighborhood in South Philadelphia, Kalina said, he found himself explaining what a barrier island is.

[c1ue]

Re: Peak Cheap . . . Sand

heh heh, this line 'splains all you need to know:

Kalina, 36, is not a scientist, but he's fascinated by telling the stories from science by looking at the cultural and political implications, too.

Here's what actual science is showing about sea level rise:



And more recently


Notice that sea level rise has been falling below trend recently, unsurprising given the temperature level off. And in all cases, the actual sea level rise still remains 3.1 millimeters per year. So in 100 years, sea level will have increased a bit over 1 foot.

Eek.

[shiny!]

Re: Peak Cheap . . . Sand

8 out of 10 of the most expensive hurricanes have hit the US since 2004.

Are those numbers adjusted for inflation?

[c1ue]

Re: Peak Cheap . . . Sand

What makes people think coastal property owners don't pay anything for insurance? 8 out of 10 of the most expensive hurricanes have hit the US since 2004. Insurance companies are firm believers in global warming and in increasingly powerful weather events. They have been getting out of coastal insurance and thereby driving up insurance prices for almost a decade. Coastal policies have gotten longer and longer, mostly detailing what kinds of damage will not be covered.

5-6 Million homeowners get insurance through the federal government. They constitute a small percentage of coastal dwellers. Most are in Texas or Florida. True, the premiums the government collects only brings in about half of what is paid out, and true, taxpayers have been on the hook, but all of FIRE (mortgage, real estate, and insurance companies) lobbies to keep the federal premiums low. God forbid, builders be on the hook, as is the case in Chile.

Funny you should mention insurance.

Even as hurricanes have been at decadal lows in terms of both total energy, number of landfalls, number of Cat 3 landfalls, and every single other category to date, the insurance companies have been charging ever more for policies.

The reason? Documented right here:

http://www.heraldtribune.com/article...tc=pgall&tc=ar

Hurricane Katrina extracted a terrifying toll -- 1,200 dead, a premier American city in ruins, and the nation in shock. Insured losses would ultimately cost the property insurance industry $40 billion.

But Katrina did not tear a hole in the financial structure of America's property insurance system as large as the one carved scarcely six weeks later by a largely unknown company called Risk Management Solutions.

RMS, a multimillion-dollar company that helps insurers estimate hurricane losses and other risks, brought four hand-picked scientists together in a Bermuda hotel room.

There, on a Saturday in October 2005, the company gathered the justification it needed to rewrite hurricane risk. Instead of using 120 years of history to calculate the average number of storms each year, RMS used the scientists' work as the basis for a new crystal ball, a computer model that would estimate storms for the next five years.

The change created an $82 billion gap between the money insurers had and what they needed, a hole they spent the next five years trying to fill with rate increases and policy cancellations.

RMS said the change that drove Florida property insurance bills to record highs was based on "scientific consensus."

The reality was quite different.

Today, two of the four scientists present that day no longer support the hurricane estimates they helped generate. Neither do two other scientists involved in later revisions. One says that monkeys could do as well.

In the rush to deploy a new, higher number, they say, the industry skipped the rigors of scientific method. It ignored contradictory evidence and dissent, and created penalties for those who did not do likewise. The industry flouted regulators who called the work biased, the methods ungrounded and the new computer model illegal.

Florida homeowners would have paid more even without RMS' new model. Katrina convinced the industry that hurricanes were getting bigger and more frequent. But it was RMS that first put a number to the increased danger and came up with a model to justify it.

As a result of RMS' changes, the cost to insure a home in parts of Florida hit world-record levels.

Hundreds of thousands of homeowners were forced to find new insurers as national carriers fled the state.

Yet the prediction of a more dangerous Florida has not played out.

The new RMS model called for at least 11 hurricanes to come ashore in the United States by the end of 2010, most of them aimed at Florida.

Four hurricanes struck the U.S. None hit the Sunshine State.

RMS stands by its five-year outlook and contends that the risk of hurricanes remains higher than normal. Company officials last week said they would continue to adjust their model as needed, but a single five-year lull does not disprove their results.

Yet a growing number of experts now wonder if the changes spurred by RMS -- and the accompanying spike in insurance premiums -- were justified.

The woman credited with launching the industry of hurricane modeling questions how near-term models were introduced. She accuses RMS of overselling software that lacked sufficient scientific support, and says insurers accepted the output of that model as if it were fact.

"I've never seen the industry so much just hanging on what a handful of scientists or one model would say," said Karen Clark, founder and former CEO of AIR Worldwide, an RMS competitor.

"They're just tools," Clark said.

"They're models.

"They're wrong."

FOUR MEN, FOUR HOURS

The daily papers were still blaring news about Katrina when Jim Elsner received an invitation to stay over a day in Bermuda.

The hurricane expert from Florida State University would be on the island in October for an insurance-sponsored conference on climate change. One of the sponsors, a California-based company called RMS, wanted a private discussion with him and three other attendees.

Their task: Reach consensus on how global weather patterns had changed hurricane activity.

The experts pulled aside by RMS were far from representative of the divided field of tropical cyclone science. They belonged to a camp that believed hurricane activity was on the rise and, key to RMS, shared the contested belief that computer models could accurately predict the change.

Elsner's statistical work on hurricanes and climatology included a model to predict hurricane activity six months in advance, a tool for selling catastrophe bonds and other products to investors.

There was also Tom Knutson, the National Oceanic and Atmospheric Administration meteorologist whose research linking rising carbon dioxide levels to potential storm damage had led to censoring by the Bush White House.

Joining them was British climate physicist Mark Saunders, who argued that insurers could use model predictions from his insurance-industry-funded center to increase profits 30 percent.

The rock star in the room was Kerry Emanuel, the oracle of climate change from the Massachusetts Institute of Technology. Just two weeks before Katrina, one of the world's leading scientific journals had published Emanuel's concise but frightening paper claiming humanity had changed the weather and doubled the damage potential of cyclones worldwide.

Elsner said he anticipated a general and scholarly talk.

Instead, RMS asked four questions: How many more hurricanes would form from 2006 to 2010? How many would reach land? How many the Caribbean? And how long would the trend last?

Elsner's discomfort grew as he realized RMS sought numbers to hard-wire into the computer program that helps insurers set rates.

"We're not really in the business of making outlooks. We're in the business of science," he told the Herald-Tribune in a 2009 interview. "Once I realized what they were using it for, then I said, 'Wait a minute.' It's one thing to talk about these things. It's another to quantify it."

Saunders did not respond to questions from the Herald-Tribune. Knutson said if RMS were to ask again, he would provide the same hurricane assessment he gave in 2005.

But Emanuel said he entered the discussion in 2005 "a little mystified" by what RMS was doing.

He now questions the credibility of any five-year prediction of major hurricanes. There is simply too much involved.

"Had I known then what I know now," Emanuel said, "I would have been even more skeptical."

Elsner's own frustration grew when he attempted to interject a fifth question he thought critical to any discussion of short-term activity: Where would the storms go?

The RMS modelers believed Florida would remain the target of most hurricane activity. Elsner's research showed storm activity shifted through time and that it was due to move north toward the Carolinas.

But RMS' facilitator said there was not enough time to debate the matter, Elsner said. There were planes to catch.

In the end, the four scientists came up with four hurricane estimates -- similar only in that they were all above the historic average.

RMS erased that difference with a bit of fifth-grade math. It calculated the average.

Thus, the long-term reality of 0.63 major hurricanes striking the U.S. every year yielded to a prediction of 0.90.

Contrary to Elsner's research, RMS aimed most of that virtual increase at Florida.

On paper, it was a small change from one tiny number to another tiny number.
Plugged into the core of a complex software program used to estimate hurricane losses, the number rewrote property insurance in North America.

Risk was no longer a measure of what had been, but what might be. And for Floridians living along the Atlantic, disaster was 45 percent more likely.
RMS defended its new model by suggesting it had brought scientists together for a formal, structured debate.

Elsner disputes that idea.

"We were just winging it," he said.

PREDICTING APOCALYPSE

In the Oz of insurance, RMS is the man behind the curtain.

The company is a Silicon Valley prodigy created 22 years ago by four Stanford graduates and their engineering professor, who parlayed a research project into a commodity: calculating earthquake probabilities and selling them to the insurance industry.

It was a short leap from there to run odds on just about every terrible and unlikely event, from Florida hurricanes to Japanese typhoons to European tempests, what RMS CEO and co-founder Hemant Shah calls a "full portfolio of apocalyptic hazard events."

The company Shah started from his California apartment is now a $200 million-a-year enterprise. Major insurance and reinsurance companies the world over pay annual subscriptions of $1 million or more to lease RMS' disaster-predicting software.

The impact these private models have on the insurance price homeowners pay is so great that Bob Hunter, insurance director for the Consumer Federation of America, calls them unregulated "rate bureaus."

For most of the past two decades, risk models have relied on actual hurricane activity recorded over more than 100 years to produce averages and other estimates of storm formation.

But even before Katrina, RMS was under pressure to disband the long-term outlook. Insurance insiders wanted something they believed would be more accurate. And they wanted it to forecast hurricane activity for next few years based on current conditions, not simply assume history would repeat itself.

The pressure came from several places. Some reinsurers sought validation that global warming was increasing the threat of hurricanes. Others in the industry wanted a short-term model to encourage investors, who wanted odds on their returns in the near term.

Shah says he had an obligation to pursue the short-term model because of the belief that hurricanes had gotten more dangerous.

"How are you going to incent people to mitigate their homes if you don't have the right kind of signaling on what risk really is?" he told the Herald-Tribune in 2008.

An accurate prediction of the near future could save insurers billions of dollars by indicating when to raise rates or drop policies in places most likely to be ravaged. It's the difference between predicting how many times the number 1 will appear in 100 rolls of the dice, and anticipating what number is expected for the next five rolls.

That, essentially, was what RMS promised.

RiskLink 6.0, RMS chief researcher Robert Muir-Wood wrote in a February 2006 column, "is likely to be the most eagerly awaited model ever introduced into the reinsurance market."

RUSHING TO RAISE RATES

Records show reinsurers and insurers did not wait.

Using numbers RMS provided in its promotional materials, they began increasing their own hurricane loss estimates 30 to 40 percent, six months before the new model was finished in May 2006.

Florida insurers in turn sought rate boosts in anticipation of what the new model would do to their own costs.

But the yet-unpublished five-year model did not become an industry standard until December 2005, when it was embraced by A.M. Best, the Chicago firm that provides financial ratings for insurance investors.

Best said it would determine an insurer's soundness by simulating its performance in back-to-back 100-year hurricanes as calculated by the five-year model.

The reasoning was simple.

"Catastrophe is the single largest threat of insolvency to an insurance company," Devin Inskeep, senior financial analyst at A.M. Best, said in an interview.
According to a confidential presentation one of its officers gave an industry think tank, RMS calculated its new hurricane model raised the expected cost of a major U.S. hurricane by $55 billion.

Plugging that model into A.M. Best's stress test meant the industry as a whole would need to raise $82 billion to remain solvent.

RMS' two chief competitors argued there was inadequate scientific grounding to heavily promote a five-year outlook.

Clark, at the time CEO of AIR Worldwide, said she urged A.M. Best to reconsider requiring a model "based on theories."

Having alternative models available was good, she said, but "I personally was an advocate of not rushing into something that was not tested and would have a dramatic change. Certainly, I had a lot of conversations with A.M. Best."

The warnings were not heeded. Both Eqecat and AIR eventually produced their own five-year versions, though AIR warned clients it considered the only credible version to be the long-term model.

By January 2006, five months before RMS released its new model, at least half a dozen reinsurers were pricing their contracts based on the new numbers, comments made in quarterly earnings calls show. The pricing triggered a cascade of rate hikes in Florida.

In a calculation Florida regulators learned about two years later, State Farm added a $1.5 billion "frequency adjustment" to its potential hurricane losses. That, in turn, required it to buy more reinsurance from its parent, a cost that resulted in a 47 percent rate increase to its Florida customers.

Allstate increased the loss estimates of its long-term hurricane model by 41 percent, a "climate cycle" adjustment it only briefly noted within its 4,000-page request for a 22 percent rate hike.

By the time the actual model was released in May 2006, it had already reshaped the Florida property insurance market, unleashing the largest spike in premiums in state history.

Florida has a law intended to prevent just such chaos.

A state commission must review and approve catastrophe models before insurers may use them to set rates. No short-term model has ever passed that test.

RMS in 2007 submitted its model for review by the Florida Hurricane Loss Methodology Commission -- the only body of its kind in the nation.
Meteorologists, statisticians and engineers for the commission began a lengthy review. But when RMS learned those reviewers planned to reject the model, the company withdrew it from consideration.

A draft report shows the objections centered largely on how RMS had determined its new hurricane rates.

The panel said the model change failed to meet credibility and bias tests, and it questioned how RMS had picked its four scientists and why so few were invited.
Shah later told the Herald-Tribune he believed Florida was "mucking things up," suppressing a credible view of risk "so pricing can be more affordable."

"If you artificially constrain your view of risk then you're not going to have the clarity of insight that suggests what really needs to be done to solve the problem," he said.

RMS continues to promote its short-term model as the preferred option for its customers. A survey by Bermuda officials shows it is the dominant model for Bermuda reinsurers, the most crucial source of private hurricane protection for Florida.

MONKEYS COULD DO THIS

At the outset in 2005, RMS promised to revisit its forecast at the end of every season. "If there is a material change," the company said, "rates would be updated."

So it was in October 2008 that RMS assembled a group of seven weather science experts at the Hotel Victor on Miami's South Beach.

Rather than produce their own storm predictions, they were asked by an expert in gathering scientific opinion to rank 39 different climate models that RMS would then run to produce a five-year forecast.

The man running the show was Tony O'Hagan, a British statistician who had developed drug trials for AstraZeneca. He came armed with Tiddlywinks, 30 for each scientist, to help them visualize and rank the weather simulators.
What struck University of Colorado environmental science professor Roger Pielke as he played with his pile of green chips was the pointlessness. Pielke, already a critic of the five-year forecast, believed the 39 models were a stacked deck, "biased upwards."

RMS said it gave its experts the option of sticking with a long-term average. "We were strongly encouraged not to do so," Pielke said.

Another participant, Georgia Tech climatologist Judith Curry, had her own misgivings. She believed the selection too narrow.

"I thought all of the models were wrong. I didn't have confidence in any of them," Curry said.

When RMS averaged the scientists' choices, the number of expected storms had dropped from the previous finding in 2005.

This time, the number of Category 3 and higher hurricanes expected to strike the U.S. each year dropped, from .9 to .8, a seemingly small change.

That decrease meant the risk of hurricanes had dropped by a third. Presumably, homeowners' premiums should follow suit.

But there was no rush to adjust homeowners' bills and no publicity surrounding the new scientific "consensus."

RMS in December 2008 described the results as "consistent" with past findings. It disclosed the lower numbers six months later in an April 2009 confidential report to clients. By then it was too late to effect that year's reinsurance rates for many insurance companies.

Company vice president Claire Souch denied that RMS promoted the increase and downplayed the decrease. "Our time lines were the same," she said.
Even after it was released, brokers said, the revised model was not roundly embraced.

"It is true that many 'set aside' the model change when underwriting this year," said John DeMartini, vice president at the Towers Watson brokerage.

"While they were quick to adopt near-term when it raised loss estimates, they didn't commit to sticking with it through reductions."

Following the unusually inactive 2009 season, RMS announced it would skip its annual expert review. By fall 2010, RMS had changed its methodology to remove the human element, Souch said. Souch said a new model will be released in February. It is expected to decrease rates along the coast and increase them inland, RMS officials said.

For his part, Pielke returned to Colorado and set up a random number generator to rank RMS' 39 climate models from 2008 -- akin to blindly throwing darts to choose the best model.

The outcome nearly matched the scientists' consensus.

"So with apologies to my colleagues," he wrote in his science policy blog, "we seem to be of no greater intellectual value to RMS than a bunch of monkeys."

Or in other words: a company which would profit from a skewed model, serving an industry which would profit from a skewed model, found a way to come up with a skewed model.

What a surprise.

[Thailandnotes]

Re: Peak Cheap . . . Sand

Or to put it more succinctly..."Despite huge Katrina-related losses in 2005, the Consumer Federation of America estimates that in 2006, the insurance industry cleared profits of nearly $60 billion, its highest ever."

10,000 deductibles for wind damage are not uncommon.

Meanwhile most consumers have never heard of RMS, Eqecat, AIR Worldwide.