MONTE CARLO, Monaco—A new hurricane risk model likely will have some impact on Jan. 1 catastrophe reinsurance renewals, predict participants at the Rendez-Vous de Septembre reinsurance meeting in Monaco this month.

At the center of the discussion is Newark, Calif.-based Risk Management Solutions Inc.'s Version 11 model for U.S. hurricanes. The new model, which puts more weight on the impact hurricanes can have inland, could give rise to increased exposures for some cedents, say observers.

The RMS model revision was a big topic of discussion at this year's Rendez-Vous. Several cedents are in discussions with RMS about the appropriateness of the new model to their portfolios, according to Patrick Hartigan, team leader for reinsurance at Dublin-based Beazley Group P.L.C.

The effects of the model change combined with the series of natural catastrophe losses this year likely will result in rate increases in the single digits for catastrophe-exposed business at Jan. 1, he said.

“To our pleasure and surprise here in Monte Carlo, the market seems to have moved from being distracted at the level of change to being constructive about considering the new model on its own merits,” said Peter Nakada, managing director in RMS' Hackensack, N.J., office. He said people are now talking about “integrating the new model with their decision-making processes.”

The president of an RMS competitor stressed that it took a different approach to model release, favoring what he called “model stability and frequent updates.”

“As we get a deep understanding of the risk, we get it into the model-development process and get it to our clients” as soon as possible, said William Keogh, the Hackensack-based president of Oakland, Calif.-based EQECAT Inc. He said doing a “big-bang” approach to model release potentially means dramatic changes.

The release of RMS' new model was expected but its impact was not, said Mark Coleman, a director at Standard & Poor's Corp. in London.

Some insurers' exposures have greatly increased under the new model, he said. “As a result, some companies have bought more reinsurance, some have written less business,” but for the most part, insurers “are still digesting the model changes,” he said.

S&P tends to view a slavish adherence to any one model negatively, he said.

“We recommend that models are used as tools and that clients use a "blended' approach,” said David Flandro, global head of business intelligence at Guy Carpenter & Co. L.L.P. in London.

Another modeler noted that a trend toward the use of multiple models is under way. Clients are not using them “blindly,” said Uday Virkud, executive vp of Boston-based AIR Worldwide. “Clients are getting more sophisticated.”

The revisions to models cannot be ignored, said Martin Davies, CEO of Towers Watson Capital Markets Ltd. in London.

“Models necessarily are under constant reappraisal,” he said.

At the June and July renewals, many clients still were using a blended approach of older and newer versions of the models, he said, but at Jan. 1, many will use the latest versions. There are areas where the new model versions show a greater potential for loss than previously, he said. This may lead to clients buying more coverages for those areas or buying specialty coverages such as industry loss warranties, he said.

“By definition, the revisions to models have an effect on the rate-on-line,” said Mr. Flandro. The new RMS model will increase cedents' exposures in some cases, and there was an effect on rates at midyear renewals, he said.

The new RMS model is going to be a significant driver for Jan. 1 renewals in the United States, said Stephen Young, senior vp at Pembroke, Bermuda-based Endurance Specialty Insurance Ltd.