If the experts on Wall Street had sat up and taken notice of the advice from financial models maybe today's credit crisis would have been averted.

That is according to Karen Clark, president and chief executive officer of Karen Clark & Co., who was talking about catastrophe loss modelling on a panel including moderator Bryan Joseph, a partner at PricewaterhouseCoopers LLP (PWC), Robin Lang, from RenaissanceRe and Taoufik Gharib, director of Standard & Poor's (S&P), on the first day at the Bermuda Insurance 2008 conference held at the Fairmont Hamilton Princess hotel yesterday.

Ms Clark spoke on the over-reliance on models, what has been learnt from Hurricane Katrina and short and near-term models in a session which also debated whether improvements to catastrophe modelling have moved the reinsurance industry beyond gambling.

Ms Clark said reinsurance companies and ratings agencies were relying too heavily on cat models and should only be used as a source of information on catastrophe losses.

"If some of the experts on Wall Street had heeded this advice with respect to their financial models maybe we wouldn't be in this situation today," she said.

She said that a cat model could not go beyond gambling because a person placing a bet knows the real odds versus the complete uncertainty of what can happen with a natural disaster.

"We don't know even how many category five hurricanes have made landfall in the past 52 years and that is because there is still doubt from the scientists about Hurricane Andrew, for example.

"We do the best we can with the data that is available.

"But what we did learn from Katrina was something about the damagability of different types of construction and did some model fine tuning."

Ms Clark said that cat models could not predict the impact of a hurricane on a short-term basis and should instead be used in conjunction with other tools to estimate its effects.

She said the basic framework of the cat model and how it works had not changed since 20 years ago, but the perception was that the models were producing more detailed results.

In some companies there was a disconnection between the cat modellers and the decision makers, Ms Clark added, and there needs to be an interpretation between the two about whether the numbers make sense and how they should be vetted.

But in terms of firms' over-reliance on the figures produced by the cat models, there was an opportunity for other businesses to gain a competitive advantage over them by using the other factors alongside the cat models.

Mr. Lang spoke of the current state of cat models, how they are used and how they impact decisions in the overall process and ratings.

"Models are wrong and will never give you the right answer," he said. "They are nothing more than a tool in a tool kit of an underwriter or risk manager.

"What you need is a healthy dose of scepticism, you need to understand that this is a tool and that all models are wrong."

He said it was important not to use a single cat model to get results but rather to employ several different ones to give a range of possible outcomes.

"I don't think that the appropriate use of cat modelling is exposing the industry to a risk of systemic failure," he said.

Mr. Gharib said, from a ratings agency perspective, his company did not rely solely on data provided by companies, but had discussions with its clients to understand how they came up with those figures.

And he stressed the value of good underwriting and how it cannot be replaced by cat models and that accurate estimates were based on how the insurance is written and how the culture of the company influences its underwriters.

The conference kicked off with an opening speech by Caroline Foulger, an insurance partner at PWC, and Grace Osborne, managing director and head of North American Insurance Ratings at S&P. The day concluded with a speech about insurance-linked securities and capital market developments, hosted by Ms Osborne and conducted by panellists Craig Wenzel, director of insurance capital markets at Deutsche Bank Securities Inc, Dr. Robert Herde, executive director of Munich Re Capital Markets and John Scheid, global insurance assurance leader at PWC.