Florida Commission on Hurricane Loss Projection Methodology Approves Revisions to Most Acceptability Standards

 

After nearly two days of lengthy discussion that spanned October 19 and 20, the Florida Commission on Hurricane Loss Projection Methodology (“FCHLPM”) approved most of the revisions that had been proposed to a long list of 2009 Standards to Determine Acceptability (“Standards”) used to review hurricane models.   Once ultimately approved, the final version of these Standards will become the 2011 version, which must be formally published by December 31, 2011, according to Florida Hurricane Catastrophe Fund Management Review Analyst Donna Sirmons.

In their review of the Standards, however, FCHLPM members balked when it came to Actuarial Standard A-6 on Loss Output.  Despite hours of discussion and disagreement, FCHLPM members agreed to reconsider the technical aspects of this Standard during another meeting on November 16, 2011.  The FCHLPM will also consider the Model ID Submission Data during its November meeting, since it was not approved during this meeting due to a lack of time.

During the meeting, the FCHLPM heard reports from the Vulnerability Standards Committee, the General Standards Committee, the Meteorological Standards Committee, Statistical Standards Committee, Computer Standards Committee and the Actuarial Standards Committee.  Some of the Standards were approved with little discussion after proposed amendments were explained, but others drew criticism and spurred questions and pleas for more time.

Topping the list of concerns were the Actuarial Standards, which provoked so much discussion that the FCHLPM ended review of these Standards during the first day of the meeting in order to allow time for consideration of all the others, after which it returned to the Actuarial Standards again the following day.  The proposed revisions were described as “dramatic changes to the actuarial forms that will make the review process better,” however, little agreement could be reached on some of these proposed changes.  The Actuarial Standards include modeling input data, event definition, modeled loss cost and probable maximum loss considerations, policy conditions, coverages and loss output.

Revisions to the Loss Output Standard provoked the most heated debate, with Professional Team member Marty Simons repeating over and over that there were too many questions left unanswered and not enough information available to make an informed decision.  At one point, he stated that he did not believe they would be able to properly revise the Standards by the end of the year.

The Loss Output Standard outlines the relationship of loss cost to risk, ZIP codes, construction type, building codes and individual coverages, among other factors.

“There is a lack of knowledge as to what is being presented.  (The modelers) are trying to get something done.  I just don’t think you have time to get this approved,” Mr. Simons said.

He added, “It’s our lack of knowledge of what went into production of this form.  Our job is to provide you with information and we don’t have that information.  It’s a lack of backup information.” 

During the review of the Loss Output Standard, it was agreed to transfer deductible sensitivity and coverage sensitivity to the Logical Relationship to Risk Form.  But other changes were not so easily approved.

Discussions swirled about different requirements and reasoning for proposed revisions.  It was finally agreed upon that the modelers and Professional Team meet afterwards and try to come up with agreeable revisions together. 

“We are looking for relationships between individual items.  That is the only rationale for this form,” Mr. Simons stated. 

Jack Nicholson, chairman of the FCHLPM’s Acceptability Process Committee, said he wanted to be certain adequate information was available to make the necessary decisions.

“I want to be sure the ‘Pro Team’ has what it needs, but I don’t want to force them to have something they are uncomfortable with,” Dr. Nicholson stated.

Vulnerability Standards also spurred discussion, with much debate focused on the Derivation of Vulnerability Functions Standard.  Of concern was some proposed alternative language that said Vulnerability Standards “shall include damage due to hurricane hazards such as wind speed and wind pressure, water infiltration and missile impact; but only when those damages will not also be caused by flood storm surge, or wave action.”

Although the other Standards drew some discussion, many of the suggested revisions – most of which were highly technical-were approved with limited discussion after the language and content changes were explained 

The FCHLPM also approved revisions to the various steps of acceptability, which included sections on the acceptability process, on-site review, the Commission structure, introduction, inquiries or investigations, findings of the Commission, principles, references and definitions.  Most of the revisions involved language changes or changes in dates.

With no further business before the FCHLPM, the meeting was adjourned.

 

 

  Should you have any questions or comments, please contact Colodny Fass.

 

 

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