Florida Commission on Hurricane Loss Projection Methodology Approves ARA HurLoss Version 5.0 During First Half of Day-Long Meeting
Jun 2, 2011
This morning, June 2, 2011, the Florida Commission on Hurricane Loss Projection Methodology (“FCHLPM”) met to consider approval of the Applied Research Associates, Inc.’s (“ARA”) Model, HurLoss Version 5.0, which was submitted under the FCHLPM’s 2009 Standards to Determine Acceptability.
Today’s meeting began with FCHLPM professional staff confirming that ARA had adequately addressed all deficiencies previously identified in its model.
ARA representatives then presented an overview of HurLoss Version 5.0, which is based on a Hurricane Risk Model and a Damage and Loss Model. The Hurricane Risk Model is composed of a tracking model, which tracks all named storms that initiate in the Atlantic Ocean, Caribbean Sea and the Gulf of Mexico, along with a wind field model that measures the wind pressure across the area of the storm. The Damage and Loss Projection Model takes into account wind pressure, windborne debris, component resistance, physical damage models, losses given physical damage and demand surge models.
The ARA representatives provided comparisons of the new model data and actual storm impacts from hurricanes Ivan and Charley from 2005, which showed that the ARA model data was substantially similar to the actual post storm data collected. The wind model validation summary demonstrated that the model’s overall prediction error has a standard deviation of approximately seven miles per hour.
They then explained the major changes to HurLoss Version 5.0. A computational approach is used to model expected ground-up or insured losses. The new model is also able to calculate potential damages sustained by commercial-residential high-rises.
When discussing the actuarial assumptions used in the model, Commissioner Marty Simmons stated that neither ARA, nor any other risk modeler can account for the negative impact caused by public adjusters. FCHLPM Commissioner Randy Dumm stated that fraud and theft will be difficult to model, but the impact is so severe that it is an issue the Commission needs to address. The Commission then unanimously approved ARA’s HuriLoss Version 5.0.
Risk Management Solutions will present its model to the FCHLPM during the afternoon portion of the meeting. Colodny Fass will provide a full report.
Should you have any questions or comments, please contact Colodny Fass.
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