New Score Rates Insurers’ Hurricane Risk Assessment

The first of a new mark that rates how well insurance companies have assessed their potential catastrophe losses has been issued to HomeWise Insurance Companies by Karen Clark & Co.

HomeWise earned an IMARC Data Score of 675 (Excellent), which the company said was used as part of the process of securitization of $210 million of Florida hurricane risk.

HomeWise was the first company to receive an IMARC score after going through an evaluation of its internal data processes that included onsite meetings with HomeWise, its policy quoting system and policy management system vendors, its agents and field inspectors. Examiners tested the HomeWise exposure data used for catastrophe modeling for resolution, completeness and accuracy using independent data sources and actual engineering surveys of the insured properties.

For HomeWise, nearly half of 25 data attributes and all of the highest weighted attributes scored at least 90 percent on completeness and accuracy. The IMARC scoring algorithm resulted in a score of 675 for Homewise — out of a possible 800.

“The IMARC Data Review is independent of any particular catastrophe model,” said Karen Clark, president and CEO of Karen Clark & Co. “The review process is applicable to the exposure data elements used to assess the catastrophe loss potential for all regions, perils and vendor models. It is a standard process that results in an exposure data score providing external stakeholders with a consistent and comparable measure of exposure data quality across companies.”

The score was included in the disclosure of the Mangrove Re Ltd. Principal At-Risk Variable Rate Note Program. Mangrove Re Ltd. issued notes in May providing $210 million of coverage against hurricane losses in Florida.

“I believe the IMARC Data Score is important to the future of a healthy Insurance-Linked Securities market and will become a major consideration when it comes to evaluating future ILS deals,” said Dr. John Seo of Fermat Capital Management, LLC.

Dale Hammond, president of HomeWise, said the rating gives the company more confidence in its catastrophe model results and risk management decisions. “To that end, we have invested significantly in high quality systems, processes and data, and we wanted to have a team of independent experts evaluate our processes and data relative to best practices and standard benchmarks,” said Hammond.

Clark said the mark came about in response to requests from the industry. “Reinsurers and catastrophe bond investors have been urging us to develop a standard exposure data review and scoring process that would be consistent across companies,” said Clark.