NEW YORK (CNN/Money) - What's the insurance industry to do now that 2005 is going down as the worst year on record for catastrophe losses? Blame someone else.

Insurers faced with significant losses from Hurricanes Katrina and Rita are increasingly pointing the finger at catastrophe risk modeling firms, saying that the computer models inaccurately estimated the likelihood of such devastating hurricanes making landfall and provided low estimates on the potential damage insurers may face.

Catastrophe risk models gained increasing popularity over the last decade in helping insurers to determine the level of risks they face in a certain region. Models created by vendors such as Risk Management Solutions (RMS), Eqecat and AIR Worldwide compute data based on past storms and weather patterns, along with the location and construction details of insured property, to provide estimates of the probability a severe storm will hit a certain area and the likely amount of damage that would incur if it does.

And while modelers admit that they didn't anticipate the levee break in New Orleans, they insist that insurers must be willing to share the blame for not being prudent in their own loss estimates.

"The flood wasn't anticipated and we regret that we didn't model for the levee failure," Hemant Shah, chief executive of RMS, said in an interview. "But it wasn't that Katrina as a storm came as a surprise, it was more the indirect damage that resulted from the flooding."

He said no one, including the insurance industry, had foreseen that New Orleans would completely shut down, resulting in billions of dollars of business interruption claims for insurers. He added that the delays in adjustors' abilities to reach devastated properties resulted in additional damages that insurers will now have to pay to policyholders.

Shah, speaking at an industry conference in New York, said the last two years of hurricane activity, which are expected to cost the industry $100 billion, need to be used as a learning experience for both insurers and modelers in assessing risk going forward.

He said RMS plans to recalibrate its models to take into account post-hurricane issues, such as significant business interruption and prolonged property damage, and issue estimates that take into account a broader range of possible risk scenarios. Initial data will become available in February as the scientists pore over claims data from 2005 and will be finalized for the insurance industry in April, in time for the next hurricane season.

But companies are disillusioned by the shortfall in previous models and are looking to take a more active role in making their own risk assessments going forward.

"With all respect to modelers, there isn't sufficient data available to put an exact number on risk," said Stephen Lilienthal, chief executive of CNA Financial (Research), speaking at the conference on Thursday. "Modelers can be wrong and go back and adjust their data, but, guess what, I have the vaporized balance sheet."

And executives from Allstate (Research), the largest publicly traded auto and home insurer with the greatest exposure to the impacted region, said during the company's third-quarter earnings call that inaccurate models played a large part in Allstate's more than $3 billion loss in the quarter. To better manage its risk exposure, Allstate said it would cut further exposure in the Gulf Coast region.

Analysts and modelers said that the high losses may have served as a wake-up call for some insurers to take on more personal responsibility for managing risk.

"Models have become so sophisticated in recent years that some insurers may have gotten overly dependent on them," said Peter Patrino, senior insurance analyst at Fitch Ratings. "It's the insurer's ultimate responsibility to get better at using the models and provide greater quality of data into the models to begin with."

John DeMartini, senior vice president at global consulting firm Towers Perrin, said insurers should have been more conservative in their loss estimates and will have to be prudent going forward.

"Based on our assessments of the 2004 and 2005 period, insurers should inflate modeled loss estimates by 30 percent to 50 percent," he said.

And in many cases, insurers were lax in providing appropriate data to come to a better risk assessment, according to a recent report by AIR Worldwide.

The company found more than 50 percent of insurers analyzed didn't provide information about the construction quality or occupancy of the properties they insured in more than a third of their policies. That information is used by modelers to determine what kind of damage a building may incur and without it, a model's loss estimates can be significantly lower than the reality.

And many companies didn't provide a specific address or zip code for insured properties, the report found. A specific address can help a modeler determine the properties' distance to a coastline or an earthquake fault, as well as elevation levels and the type of land use in the area – all information that can help compute a more targeted loss estimate.

Looking ahead, DeMartini said modelers will have to account for the fact that hurricanes are expected to grow in frequency and severity over the next 20 years, be creative in adding factors to their models that they may not have included before and use the claims data from recent hurricane activity to assess the vulnerabilities of construction in certain areas.

And insurers will have to be more diligent about providing specific location information and should provide more information about potential construction vulnerabilities and the occupants that are within the insured structures and also add to any loss estimates provided to protect themselves from any risks that may not have been included in the models.

"We all have more learning to do," said RMS' Shah. "I think models won't diminish but will be used more properly as people realize that models are a tool rather than an answer."

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