100 year floods / storms / EQs have become 100 month floods / storms / EQs. Wake up, underwriters! Darwin has advice for you; adapt and survive or ignore the signs and perish.
That said, the biggest problem I have seen lately, and historically, is data quality, not the isolation from the real world, or ignorance, of underwriters or actuaries running these cat models. The article’s author mentions this point at the top of the article, and rightly so. NFIP administrators have recognized and mentioned their efforts to update flood zone maps, with continuing criticism of underwriters and risk managers that the updates are still inaccurate.
Addendum; the advice and insight of claim adjusters on site is invaluable for reserving the cat and pricing perspectives for the near future. They see the damage details, and susceptibility to damage of different, new construction materials, under the duress of waters and winds. So, they should be encouraged to discuss those details with cat modelers and underwriters, along with anything they can learn about the surrounding geography, and how the geo setting affected the damage severity on different types of construction material, as well as the frequency of damage to those materials.
Paige St. John wrote a Pulitzer-winning series about insurance in Florida, including the flawed cat models. “Garbage in, gospel out.” Though her article was written 10 years ago, it still holds true today. Worth a read to understand how insurers rate and underwrite based on models:
Whats commonly misunderstood is that a 1 in 100 flood simply means that in any given year there is a 1% chance of that event. Having one in one year doesn’t mean that the area is now immune from that event for the next 99 years
No, that isn’t a common misunderstanding. Everyone in the property insurance field knows what loss probabilities are, what a payback period is, and what rate on line is. Common misunderstandings you speak of MAY BE common with those outside of the insurance industry. The news media that sensationalizes everything regarding the weather, for ratings, may be responsible for that.
I think “what is commonly misunderstood” is different than “what is commonly misunderstood if you work in the insurance or weather sectors.” I don’t think you can argue with the original comment that the average Joe misunderstands what a 1-in-100 year storm actually means. Heck, people even confuse weather with climate, and that’s a pretty easy distinction to understand.
The cat models aren’t necessarily all wrong. You have states and municipalities who gave the go ahead to developers to build in potential flood areas with promises of proper drainage and mitigation that were never met. Even then 50 inches of rain would inundate any area even with all the precautions taken. Look at New Orleans most of which is built in a below sea level bowl. It’s getting to the point where insurance companies are now refusing to insure houses built in these areas including wilderness where fires erupt every summer and those too close to the beach that succumb to high tides from storms. It’s all going the way of FEMA and FAIR plan and the government and us fellow tax payers can’t keep up with this.
100 year floods / storms / EQs have become 100 month floods / storms / EQs. Wake up, underwriters! Darwin has advice for you; adapt and survive or ignore the signs and perish.
That said, the biggest problem I have seen lately, and historically, is data quality, not the isolation from the real world, or ignorance, of underwriters or actuaries running these cat models. The article’s author mentions this point at the top of the article, and rightly so. NFIP administrators have recognized and mentioned their efforts to update flood zone maps, with continuing criticism of underwriters and risk managers that the updates are still inaccurate.
Addendum; the advice and insight of claim adjusters on site is invaluable for reserving the cat and pricing perspectives for the near future. They see the damage details, and susceptibility to damage of different, new construction materials, under the duress of waters and winds. So, they should be encouraged to discuss those details with cat modelers and underwriters, along with anything they can learn about the surrounding geography, and how the geo setting affected the damage severity on different types of construction material, as well as the frequency of damage to those materials.
Paige St. John wrote a Pulitzer-winning series about insurance in Florida, including the flawed cat models. “Garbage in, gospel out.” Though her article was written 10 years ago, it still holds true today. Worth a read to understand how insurers rate and underwrite based on models:
http://www.pulitzer.org/winners/paige-st-john
Who would have thunk the upper peninsula of Michigan would have flooding this spring?
Whats commonly misunderstood is that a 1 in 100 flood simply means that in any given year there is a 1% chance of that event. Having one in one year doesn’t mean that the area is now immune from that event for the next 99 years
It also doesn’t mean we will have the event next year or 2 years from now either. 50 inches of rain is a very rare event by anyone’s standard.
No, that isn’t a common misunderstanding. Everyone in the property insurance field knows what loss probabilities are, what a payback period is, and what rate on line is. Common misunderstandings you speak of MAY BE common with those outside of the insurance industry. The news media that sensationalizes everything regarding the weather, for ratings, may be responsible for that.
I think “what is commonly misunderstood” is different than “what is commonly misunderstood if you work in the insurance or weather sectors.” I don’t think you can argue with the original comment that the average Joe misunderstands what a 1-in-100 year storm actually means. Heck, people even confuse weather with climate, and that’s a pretty easy distinction to understand.
The comment to which I replied didn’t specify a group of people.
…I should clarify — you touched on that, but I think your qualifier of “MAY BE” is unnecessary.
Polar, modelers have to be pretty stupid with their figures not to get it right some of the time.
It depends on what your definition of the word ‘is’ is.
The cat models aren’t necessarily all wrong. You have states and municipalities who gave the go ahead to developers to build in potential flood areas with promises of proper drainage and mitigation that were never met. Even then 50 inches of rain would inundate any area even with all the precautions taken. Look at New Orleans most of which is built in a below sea level bowl. It’s getting to the point where insurance companies are now refusing to insure houses built in these areas including wilderness where fires erupt every summer and those too close to the beach that succumb to high tides from storms. It’s all going the way of FEMA and FAIR plan and the government and us fellow tax payers can’t keep up with this.
The modelers at Colorado State haven’t been too accurate over the years on the number of hurricanes they predict.