Florida Commission on Hurricane Loss Projection Methodology Reviews 2013 Standards; Public Model
Aug 13, 2013
Holding the first of a three-day meeting today, August 13, 2013, the Florida Commission on Hurricane Loss Projection Methodology (“FCHLPM”) met in Tallahassee to review the Florida Public Hurricane Loss Projection Model (“Public Model”) under the FCHLPM’s Standards and Acceptability process for 2011. The agenda also included committee discussion on the 2013 Standards and Procedures, and a review of the AIR Atlantic Tropical Cyclone Model v14.0.1.
Commission Chair Lori Medders opened the meeting.
Dr. Shahid Hamid gave a brief review and history of the Public Model, which he described as “under-resourced.” Following his presentation, the Public Model Standards were reviewed, during which the FCHLPM also discussed the application of wind mitigation credits–a process that is often burdened by competing goals of standardization versus flexibility. Currently, Florida’s mitigation credit system is significant related to insurance premiums collected. Florida Insurance Consumer Advocate Robin Westcott stressed the need to ensure hurricane loss projection models use accurate data.
Following the Pubic Model presentation, the FCHLPM reviewed updates to the specific Standards for approval. The General Standards were approved, with Standard G-1 (Scope of the Computer Model and Its Implementation) being voted on separately from the other General Standards, which were approved together. Commissioner Randy Dumm expressed concerns with Standard G-1, but ultimately voted to support its approval. The other Standards–Meteorological, Vulnerability, Actuarial, Statistical and Computer–were all approved in total.
The FCHLPM approved the Public Model Version 5.0.
Members also discussed the dynamic of determining flood losses versus wind losses in coastal areas. It was acknowledged that this nexus is very difficult to determine in many instances. Obvious issues are that the federal government is responsible for losses if the damage is determined to have been caused by flooding, whereas insurers are responsible for losses if the damage is determined to have been caused by wind. Measuring storm surge must be a consideration in determining wind damage versus water damage.
Next, AIR representatives presented an update to their company’s model as implemented in New Software Platform Touchstone 1.5.0. AIR representatives requested that changes to their worldwide model that do not impact Florida be allowed without full model review and approval by the FCHLPM.
Dr. Nicholson moved to have the FCHLPM Professional Team do an onsite review of the changes to the AIR Model and report their findings. The motion was adopted.
Next, the FCHLPM discussed and voted on the Executive Committee recommendations from June 20, 2013. Ms. Medders reviewed the recommendations. The members decided to discuss the items as part of the Executive Committee report at the next FCHLPM meeting.
Next, the Acceptability Process Committee met, led by Committee Chair, Dr. Jack Nicholson, who reviewed several proposed changes to the Committee process. For example, at the request of the Chair, the Committee may vote to disapprove a model if it finds significant errors in the model. The Committee discussed in detail situations where there is an error in an approved model. It was discussed whether the finding of an error in an approved model would be disapproved retroactively. Ultimately, it was decided that retroactive suspension would cause many problems. The Committee seemed to agree that a model would be suspended once a material error is found. Insurers should immediately stop using a flawed model until the error is fixed and the FCHLPM determines that the model is acceptable.
Following the Acceptability Process Committee meeting, the FCHLPM adjourned. Members will start the second day of their meeting tomorrow at 9:00 a.m. with the General Standards Committee.
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