Florida Commission on Hurricane Loss Projection Methodology Meeting Report: May 20-21

On Tuesday, May 20, and Wednesday, May 21, 2008, the Florida Commission on Hurricane Loss Projection Methodology (“Commission”) held a series of meetings to discuss loss model submissions. To view a copy of the complete agenda, click here.

The meeting was called to order by Chairman Randy Dumm, insurance expert from Florida State University with the following members in attendance:

• Vice Chairman Larry Johnson, Actuary from the Florida Hurricane Catastrophe Fund (“FHCF”) Advisory Council
• Kristen Bessette, Actuary from Property and Casualty Industry
• Terry Butler, Consumer Advocate from the Florida Department of Financial Services
• Howard Eagelfeld, Actuary from the Florida Office of Insurance Regulation
• Sneh Gulati, Statistics Expert from Florida International University
• Jack Nicholson, Senior Officer of the FHCF
• Hugh Willoughby, Meteorology Expert from Florida International University

Meteorologists, structural engineers and actuaries from the companies that submitted loss projection models were also in attendance.

The following loss projection models were submitted:

• AIR Worldwide Corporation (“AIR”) submitted the Atlantic Tropical Cyclone Model, Version 10.0
• Risk Management Solutions (“RMS”) submitted the RiskLink Model, Version 6.0b
• Applied Research Associates, Inc. (“ARA”) submitted the HurLoss Model, Version 4.1

Each loss model previously underwent a detailed review process to see if the following standards have been met:

• General
• Meteorological
• Vulnerability
• Actuarial
• Statistical
• Computer

On March 12, 2008, the Commission held a meeting to review the models further and note any deficiencies found. These deficiencies were to be corrected subsequent to the May 20 and 21 meetings. To view a summary of the March 12 meeting, click here.

Subsequent to the public meeting held for each model, each model’s trade-secret information content was discussed during a closed Commission meeting.

During the public meetings, each model standard again was examined, discussed by Commission and professional team members, and voted on for final approval.

All models ultimately were approved.

Steve Parton, general counsel for the Florida Office of Insurance Regulation, expressed concerns during the AIR discussion regarding Legislation arising from the 2008 Regular Legislative Session that could impact hurricane loss modeling in general. Mr. Parton suggested that the Commission should alter it’s procedures to allow audience members to comment early in the model review process. Mr. Parton also stated that he was concerned about the lack of an engineer on the Commission and that the actuarial standards used for all models do not take any risk load data into account.

The meeting was then adjourned.

Should you have any questions or comments, please do not hesitate to contact this office.