RMS Predicts Industry Exposures to Increase

April 20, 2007

  • April 22, 2007 at 11:23 am
    Jane Logan says:
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    RMS might be based in CA, but it\’s parent company DMGT is based in London and the ultimate parent company is based in Bermuda-my guess is that the ultimate big Daddy is a Reinsurance Company:

    A.I.R is owned by ISO of which 85% is owned by the insurance industry.

    The insurance industry controls the hurricane modeling industry-don\’t let anything they say convince you otherwise.

    -Jane Logan, CPCU and Member of
    Citizens for HO Insurance Reform
    Cape Cod, MA

  • April 22, 2007 at 2:57 am
    Tom says:
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    So what? Actuaries work for insurance companies too, and last time I checked, two plus two was still four, even when an insurance company actuary does the math.

    Given the $80 billion+ in losses from storms in 2004 and 2005, just what exactly do \”homeowners reform\” advocates suggest? Suppress rates? Pass laws forbidding storms?

    There are an awful lot of critics out there, but I sure don\’t hear any intelligent positive recommendations from them.

  • April 24, 2007 at 5:08 am
    Jane Logan says:
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    The hurricane modelers don\’t add, they project, the entire process is subject to horrifying abuse.

    What we have here is a conflict between an industry which requires long term planning being managed by executives compensated on short term results.

    RMS and AIR are the next Enron.

    – Jane Logan, CPCU
    Citizens for HO Insurance Reform
    Cape Cod, MA

  • April 23, 2007 at 6:38 am
    bill schneider says:
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    Come on Tom, give us something positive!

    There\’s money in dem\’ thar\’ dark clouds!

    Profits make the world go \’round, make the world go \’round, make the world go \’round.

    Thanks Jane. Without you, no brakes to that profiteering…and, Tom winds up paying more than what\’s reasonable.

    What\’s reasonable is — everyone would agree — up in the air, because everymind is a different world.

    But, Tom, business is to take everything it can get…and it hates adjustments.

    Hi yo Silver, away.

  • April 24, 2007 at 3:00 am
    Actuary says:
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    DMGT is a media conglomerate, so you\’re just plain wrong about that.

    EQECAT is ultimately owned by the American Bureau of Shipping, a non-profit classification society.

    ARA is employee-owned.

    As for AIR, the insurance industry owns ISO in roughly the same manner as policyholders own a mutual insurer. They have no say in how ISO produces its work, much less AIR. Besides, ISO has only owned AIR for about five years now. How has ISO ownership changed AIR\’s model during that time?

  • April 24, 2007 at 3:14 am
    bill schneider says:
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    Dearest Actuary: Impressed by your research. Would you be kind enough to supply us with the answer to your question?
    Adios, Tonto!

  • April 24, 2007 at 3:20 am
    Actuary says:
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    Sure. It hasn\’t. For proof, you need only look at AIR\’s statements on near-term hurricane frequency.

  • April 24, 2007 at 4:17 am
    bill schneider says:
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    Dearest Actuary. Your response amounts to the continuing saga of non-answers.
    Hasta Luigi, Hi-yo Silver.

  • April 24, 2007 at 5:14 am
    Jane Logan says:
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    I know DMGT is media conglomerate, I\’d like to know who in Bermuda owns DMGT-again my guess is a reinsurance carrier or some entity in the CAT Bond business, or both… I\’m sure the change in ownership of ISO being five years ago and hurricane modeling becoming so popular the past five years is simply an astounding coincidence…

    And another thing, outsourcing the storm modeling to another entity and calling the data \”proprietory\” is just a way to circumvent the regulatory process by not including data to allow independent review of results.

    Here is MA the recent FAIR Plan filing (3,000 pages worth) has most, if not all the key data \”redacted\” therefore the Commissioner of Insurance does not have sufficient information to meet her statory obligation to determine if rates are adequate and not excessive.

    I\’m looking forward to attending the hearing on the MA Fair Plan/MPIUA rate filing this coming Friday.

    -Jane Logan,CPCU
    Citizens for HO Ins Reform
    Cape Cod, MA

  • April 25, 2007 at 11:43 am
    Actuary says:
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    Hurricane models didn\’t become popular in the last five years. This happened during the 90\’s. They\’re in the mainstream media more today, but they\’ve actually been in use since the late 80\’s.

    The models all undergo intense scrutiny by the Florida Commission on Hurricane Loss Projection Methodology (FCHLPM), which is holding a public meeting in mid-May which you should attend if you\’re really interested in learning how these things work. The review by the FCHLPM, which includes on-site assessment of trade-secret formulas and assumptions, forms the basis of model acceptability for several coastal states\’ rate filings. The FCHLPM review process is available at http://www.sbafla.com/methodology/pdf/2007/2006%20ROA%20Final.pdf.

    For the record, the traditional way of making rates, prior to the switch to hurricane models in the mid 90\’s, was to average the past several years of experience. Given the 04-05 hurricane seasons, the traditional method would actually produce much higher rates for affected states than the models do. This is why Florida now REQUIRES the use of hurricane modeling for ratemaking.

    The Florida OIR commissioned and now uses their \”public\” model to review all rate filings. Contrary to natural expectations, it produces higher rates for some companies and lower rates for others, depending on their geographic distribution (the public model tends to underestimate coastal losses and overestimate inland losses). Also contrary to expectations, despite its name, the inner-workings of this model is the most closely held secret in the modeling industry. This may change soon, as the public model is scheduled to be reviewed by the FCHLPM next month along with the private models, unless the OIR succeeds in it\’s legal challenge to avoid having its model scrutinized by the commission.



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