Florida Commission on Hurricane Loss Projection Methodology Approves Corrected RMS Model
Mar 8, 2013
At its meeting yesterday, March 7, 2013, the Florida Commission on Hurricane Loss Projection Methodology (“FCHLPM”) voted to invalidate the RMS North Atlantic Hurricane Model, RiskLink 11.0.SP2 submission because of a minor error that affected loss costs. The corrected version of the model was then adopted.
However, approving the corrected version, RMS North Atlantic Hurricane Model, RiskLink 11.0.SP2C, proved trickier than expected. Because new models are only approved at certain times each year and this particular one was being revisited because of an error, FCHLPM members were uncertain if they should also re-approve each of the FCHLPM six individual Standards of Review, since no written directives exist to indicate how such a situation should be handled.
Michael Young from RMS pointed out that the action was an error correction.
“This is not a new model,” he said.
FCHLPM members wondered whether Model 11.0.SP2C should be considered a new Model or a corrected old one, and if a new one, did they have to review all the Standards again?
The answer was unclear, so the FCHLPM decided to approve the Standards again.
“We have found an error and determined an appropriate course of action,” one FCHLPM member noted. “One appropriate course of action was to rescind the previous model, but from this point on, we have flexibility to deal with this however we see fit.”
After some discussion, FCHLPM members agreed to vote individually on each Standard with assurance from the FCHLPM Professional Team that the revised model complied. The Standards are divided into six sections: General, Meteorological, Statistical, Computer, Actuarial and Vulnerability.
FCHLPM members voted unanimously “yes” on each Standard, approving RMS North Atlantic Hurricane Model, RiskLink 11.0.SP2C.
The actual correction involved making changes to the output ranges (Form A-6 in the 2009 Report of Activities) and Personal Residential Loss Costs (Form A-1 in the 2009 Report of Activities). The Commission action rescinded the original version of the Model with those two forms. The new version replaced the first one with the corrected forms. It was noted that the magnitude of the error and loss costs was well under one percent.
The FCHLPM was notified of the error in October 2012, and RMS notified its clients through its Website in November 2012, an RMS representative said.
After the vote of approval, the FCHLPM agreed to send RMS a letter saying the new version had been found acceptable under all Standards.
It was agreed that further discussion should ensue during the next Report of Activities on the process to handle such situations in the future.
With no further business before the FCHLPM, the meeting was adjourned.
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