New York--New catastrophe models may push catastrophe insurancerates up as much as 30 percent, according to an insurance companyexpert.

The observation came during Swiss Re's annual year-end "Economicand Insurance Industry Review of 2005 and Outlook for 2006" forumheld here today.

However, Swiss Re management cautioned it is still too early toknow for certain how much rates will eventually rise as a result ofthis past season's hurricanes.

Discussing the past hurricane season and the losses incurred bythe industry, executives said the models used to underwrite therisks did not fail to predict losses but lacked information forwhat turned out to be the unexpected.

"Models are only tools, and are only as good as the data thatgoes into the models," said Patrick Mailloux, president and chiefexecutive officer of Swiss Re America Corporation.

He said the weakness in the models used to underwrite risk wherehurricanes struck the Gulf Coast this past season "led tounderestimation of risk and capital to support the exposure."

This is leading to increased demands from rating agencies togain greater capital, he noted, and the reinsurers are turning tothe investment markets to adequately shore up their books.

Andrew Castaldi, head of catastrophe and perils unit,property-casualty, noted scientific evidence that indicates thehurricane season is in a cycle of increased activity. He said thatcycle, which could run in a 20-to-40-year period, could be in itsfirst third of increased activity--just entering the peak ofactivity--meaning more hurricanes for a few more years.

Noting the damage to the Gulf Coast, he said that if a similarpath of destruction hit the New York metropolitan area, thedestruction could run from Brooklyn east to the end of Long Island,creating untold damage up to a mile inland.

He added that looking at cycles, there should be concern overincreased earthquake activity. Some believe, he noted, that theCalifornia region is due for a quake of 6.2 or higher on theRichter scale.

Newly formed catastrophe models, based on recent experience, Mr.Castaldi said, could cause catastrophe rates to increase as much as30 percent, but he added that it is still too early to know if thiswill be the case.

Mr. Mailloux noted that while this season is turning out to be alate one, whatever the rate increases turn out to be, they will beclient specific. He added that "a substantial part of [Swiss Re's]book is still being rated at this time."

Andreas Beerli, CEO of Americas Division, who will become thecompany's chief operating officer Jan. 1, noted that there will bea continued need for precise underwriting. He said it still remainstough for insurers to get strong investment returns from the bondmarket where they traditionally turn.

"Insurers need to be focused on underwriting returns," said Mr.Beerli. "Underwriting discipline remains essential."