In 1992, Hurricane Andrew devastated the Florida coast, damaging more than 280,000 homes and triggering more than $17 billion in insurance payouts (1992 dollars). Eleven insurance companies went bankrupt from Hurricane Andrew[1]. Fear and uncertainty about the future of the catastrophe insurance liabilities market led to fewer insurance options for homeowners’ insurance and systematically led to potential disruptions in the loan origination market. These loss levels reached by Hurricane Andrew were shocking and led to the development of analytical models to help insurers reduce surprises and develop more rational capital adequacy planning for the finance of large hurricane occurrences.
In response to this, the Florida Commission on Hurricane Loss Projection Methodology (FCHLPM) was created during the 1995 Legislative Session as an independent panel of experts to evaluate computer models and other recently developed or improved actuarial methodologies for projecting hurricane and flood losses[2]. The FCHLPM certification process is arduous, entailing comprehensive review and successfully passing in all standards outlined in by the commission – General, Meteorological, Vulnerability, Actuarial, Statistic and Computer Standards. The FCHLPM sends a team of experts from these specified fields outlined in these standards. This team performs an on-site review for scientific, actuarial, civil engineering, and statistical soundness of a hurricane model. The commission’s authority is confined to the realm of things “relating to the accuracy or reliability of particular methods, principles, standards, models, or output ranges used to project hurricane losses, flood losses, and probable maximum loss calculations.”
The North Atlantic Hurricane Model by CoreLogic has been certified and re-certified 17 times since 1997, consistently maintaining a certified model for usage by insurers in the state. CoreLogic is pleased to announce that our North Atlantic Hurricane Model has been certified by the FCHLPM on June 13, 2019 with Expiration of Acceptability of November 1, 2021.
For more information, visit the North Atlantic Hurricane Model page or email hazardrisk@corelogic.com.
[1] https://www.cbo.gov/sites/default/files/107th-congress-2001-2002/reports/09-20-federalreinsurance.pdf
[2] https://www.sbafla.com/method/Home.aspx
© 2019 CoreLogic, Inc. All rights reserved.
