Florida Commission on Hurricane Loss Projection Methodology Grants Modeler Review Variance; Windstorm Mitigation Credit Recommendations Outlined
Date Published: 12-07-2009
The Florida Commission on Hurricane Loss Projection Methodology ("Commission") met on December 4, 2009. To view the agenda, click here.
AIR Request to the Commission for A Flexible Model Review Process
As part of its agenda, the Commission considered a request by AIR Worldwide Corporation to be allowed to submit its Tropical Cyclone Model Version 12 outside of the Commission's every-other-year review cycle that is currently in effect for 2010.
David Lalonde, an AIR representative, explained that the requested variance is necessary in order for insurers and reinsurers to be able to use the same model.
Commission Member Jack Nicholson opined that the review cycle variance should be granted because the best available science should be leveraged for the loss projection methodology process soon as possible.
Representatives of modeling companies who were present at the meeting expressed concern that all modelers should work on the same schedule.
Ultimately, the Commission members voted in favor of allowing a variance on the every-other-year review for the AIR model.
It was noted that all modeling companies will be able to submit changes to their respective models after they have been reviewed under the 2009 standards if the changes are submitted by November 15, 2010. Also, modeling companies may submit changes to the 2009 standards for the 2010 calendar year if they submit them by March 31, 2010.
Windstorm Mitigation Committee Update
In preparation for the Commission's Windstorm Mitigation Committee's December 18 meeting, Dr. Nicholson reviewed his recommendations for the statutory report that must be submitted to the Governor and legislative leadership in 2010.
Commission Chairman Randy Dumm clarified that, while the recommendations are those of Dr. Nicholson and not the Committee, they likely will be given strong consideration.
Chairman Dumm outlined five problem areas related to reforming Florida's wind mitigation credit system and included recommended solutions:
1) Vision of State: The State of Florida should consider broad objectives such as hardening homes, solvency of insurers, data credibility and allowing the Florida Hurricane Catastrophe Fund to implement mitigation discounts.
2) Home Inspection Process on residential structures: This system should be totally overhauled, because the current system provides too much opportunity for fraud. Dr. Nicholson's recommendation is to incorporate an independent inspection organization similar to the My Safe Florida Home Program, but more comprehensive. The proposed organization would be funded by insurers through a suggested $25 surcharge on policies. Every residence would be inspected every five years. The organization itself would be subject to an annual outside audit.
3) Data Quality: Better quality data that is consistent with the needs of the hurricane modelers is required. A centralized, on-line database that incorporates geo-coding would be utilized for the data. Both modelers and the Commission would play a much larger role in developing wind mitigation discount credit data.
4) Computer Hurricane Modeling: Mitigation standards must be applied to individual policies. Because the home grading scale is not supported by adequate scientific data, it should be eliminated. A structural wind engineer should be added to the Commission membership. The annual hurricane modeling review process should be restored.
5) Ratemaking: Mitigation credits should be treated as "other" rating factors and not considered uniquely. The Commission should play a larger role in determining credit use, not the Florida Office of Insurance Regulation. The Florida Hurricane Catastrophe Fund should accept a full phase-in of the use of mitigation credits in rate calculations. Consideration also should be given to mitigation surcharges for non-mitigated homes, as well as discounts for adequately mitigated homes.
Should you have any further questions, please contact Colodny, Fass, Talenfeld, Karlinsky & Abate.
To unsubscribe from this newsletter, please send an email to firstname.lastname@example.org.