Florida Commission on Hurricane Loss Projection Methodology chooses new chair, reviews models

 

At its meeting yesterday, December 17, 2012, the Florida Commission on Hurricane Loss Projection Methodology (“FCHLPM”) selected a new chairman and reviewed hurricane loss projection model submissions from five hurricane modeling firms.

Commission members unanimously voted to name Lori Medders as the FCHLPM’s new chairman.  Ms. Medders, who abstained from the vote, had been serving as the vice chair.

The FCHLPM reviewed model submissions from the following:

• AIR Worldwide Corporation (“AIR”) – Atlantic Tropical Cyclone Model V14.0.1 as Implemented in CLASIC/2TM V14.1.0
• Applied Research Associates, Inc. (“ARA”) – HurLoss Version 6.0
• EQECAT, Inc. (“EQE”) – EQECAT Florida Hurricane Model 2013
• Florida Public Hurricane Loss Model (“FPM”) – Version 5.0
• Risk Management Solutions, Inc. (“RMS”) – RiskLink 13.0

After some discussion on each, the FCHLPM agreed to move forward with all the models if all noted deficiencies were fixed by 12:00 p.m. on January 4, 2013.  For each model, the FCHLPM reviewed answers to items on checklists for numerous highly technical Standards.  The categories of Standards included General, Meteorological, Vulnerability, Actuarial, Statistical and Computer.

A memorandum outlining the specific deficiencies is attached.

Most of the deficiencies cited required the submission of more detail, or the clarification of responses.

In other business, the FCHLPM:

• Voted to approve FCHLPM member requests for on-site visits. The approved visits include:
  • Randy Dumm – AIR, FPM and RMS
  • Bob Lee – AIR, FPM, and RMS
  • Lori Medders – EQE and RMS
  • Kristin Piltzecker-AIR and ARA
• Agreed to address an error in a previous submission by RMS during an on-site visit. The error was discovered in a previous submission, RiskLink 11.0.SP2.  An October 30, 2012 letter from RMS outlining the error is attached.
• Voted to require the modelers to address the following issues with the FCHLPM Professional Team and in subsequent meetings of the FCHLPM:
  • Development of loss costs in the models, and changes in the models of loss costs in previously-accepted models, specifically how the models handle coastal versus inland loss costs
  •  Explain how the models make assumptions for adjuster errors or contract ambiguity

Some discussion at the meeting focused on the treatment of wind and water damage in existing hurricane models.

“As we all know, the Standards of the Commission right now don’t address the treatment of storm surge.  If you want to do an inquiry into this, I would fully support that,” one FCHLPM member stated.  “I would also have it done in terms of what you want to have done in terms of what you want to do with wind and water Standards in the future.”

On hand for the meeting, Florida Insurance Consumer Advocate Robin Westcott pointed out that the non-profit group Fair Insurance Rates in Monroe (“FIRM”) is seeking an analysis that will explore the existing models’ ability to adequately assess storm surge.

Citizens Property Insurance Corporation last week agreed to spend $485,000 on a FIRM-recommended Windstorm Risk and Remodeling Analysis Initiative that will include a vulnerability study, a survey tool and an inspection program.  FIRM is concerned that the difference in rates and premiums paid in Monroe County are significantly higher when compared with other coastal communities.

“I don’t want to start any large scale avalanche here, but  . . . when it is appropriate for us to look at that understanding what we know now from Superstorm Sandy?  Many times the (Florida) models are very much viewed by other states and places as us being the gold standard,” Ms. Westcott stated.

Ms. Westcott called the subject “a huge consumer issue” throughout the country.

“I think it’s something worth talking about,” she said.

It was explained that the FCHLPM Standards are now reviewed bi-annually instead of annually, which slows the process of change greatly.

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

 

 

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

 

 

Click here to follow Colodny Fass& Webb on Twitter (@CFTLAWcom)

 

 

To unsubscribe from this newsletter, please send an email to Brooke Ellis at bellis@cftlaw.com.