PROCEEDINGS May 15, 16, 17, 18, 2005 - Casualty Actuarial Society

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492 ARCHITECTURE FOR RESIDENTIAL PROPERTY INSURANCE RATEMAKINGFIGURE 1mitigation class plan. The hurricane share of all-perils loss costsvaries between 20% and 75% by county, and the fire share variesbetween 5% and 35%. No compact set of actuarially sound classfactors would be workable against such a variable premium base.In parallel, it is also a great improvement to target the existingPublic Protection Class (PPC) factors to the proper fire premiumbase.The classical design has been tolerated by the insurance industryand its advisory organizations for too long, probably becausethe magnitude of the errors is manageable in areas of the UnitedStates where the distribution of loss costs is more geographically
ARCHITECTURE FOR RESIDENTIAL PROPERTY INSURANCE RATEMAKING 493consistent and the contribution of catastrophic events to the aggregateloss costs is moderate. In Florida, the mitigation classplan is a catalyst for the development of base rates and ratingfactors by peril, as well as the redefinition of territories usingGIS mapping software and the extension of catastrophe modelingtechnology into windstorm class and territory ratemaking.However, the concepts are applicable to homeowners pricing inother geographic areas, and more generally to other property insurancepricing exercises.Public policy also influences emerging non-catastrophiccauses of loss. Statutory coverage mandates and resistance tocoverage restrictions in states with “prior approval” policy formregulation have contributed to the skyrocketing portion of policyloss costs associated with sinkhole claims in Florida and toxicmold claims in Texas and elsewhere. Florida statutes requiresinkhole coverage and severely restrict claim settlement options,resulting in frequent total or near-total losses after moderate settlingand cracking occurs in the residential structure. While moldis only a cause of loss as a result of another covered peril, theloss adjustment expenses and risk of large judgments have beenwell documented.This paper is not about specific emerging perils; the point isthat having the ability to segregate base premiums allows a “quarantine”of the loss costs associated with these perils at an earlierstatistical stage. Pricing must keep up with the ever-expandingcoverage in the property insurance product.3. MOTIVATIONS: TECHNOLOGY AND CATASTROPHEMODELINGIt is now settled actuarial science that actual losses fromcat events over short experience periods should be replaced inratemaking data by long-run expected cat losses derived from asimulation tool and the insurer’s expected exposures. See Clark[6] for an excellent fundamental justification for building cat
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VOLUME XCII NUMBERS 176 and 177PROC
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FOREWORDActuarial science originate
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2005 PROCEEDINGSCONTENTS OF VOLUME
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2005 PROCEEDINGSCONTENTS OF VOLUME
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Editorial Committee, Proceedings Ed
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2 AN EXAMINATION OF THE INFLUENCE O
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10 AN EXAMINATION OF THE INFLUENCE
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AN EXAMINATION OF THE INFLUENCE OF
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RISKINESS LEVERAGE MODELSRODNEY KRE
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RISKINESS LEVERAGE MODELS 33There a
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RISKINESS LEVERAGE MODELS 35where f
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RISKINESS LEVERAGE MODELS 37where a
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RISKINESS LEVERAGE MODELS 39Various
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RISKINESS LEVERAGE MODELS 59APPENDI
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DISCUSSION OF A PAPER PRESENTED AT
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RISKINESS LEVERAGE MODELS 63known t
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RISKINESS LEVERAGE MODELS 734. INTE
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RISKINESS LEVERAGE MODELS 79REFEREN
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RISKINESS LEVERAGE MODELS 81EXHIBIT
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WHY LARGER RISKS HAVE SMALLER INSUR
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ADDRESS TO NEW MEMBERS 151ateship a
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ADDRESS TO NEW MEMBERS 153You shoul
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ADDRESS TO NEW MEMBERS 155strength
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MINUTES OF THE 2005 CAS SPRING MEET
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MINUTES OF THE 2005 SPRING MEETING
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Volume XCII, Part 2 No. 177PROCEEDI
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MODELING FINANCIAL SCENARIOS 179Bab
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WHEN CAN ACCIDENT YEARS BE REGARDED
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THE APPLICATION OF FUNDAMENTAL VALU
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ESTIMATING THE WORKERS COMPENSATION
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INCORPORATION OF FIXED EXPENSESGEOF
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DISCUSSION OF PAPER PUBLISHED INVOL
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APPLICATION OF THE OPTION MARKET PA
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THE “MODIFIED BORNHUETTER-FERGUSO
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ADDRESS TO NEW MEMBERS-NOVEMBER 14,
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ADDRESS TO NEW MEMBERS 743Now to an
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PRESIDENTIAL ADDRESS-NOVEMBER 14, 2
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PRESIDENTIAL ADDRESS 753me keep my
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MINUTES OF THE 2005 CAS ANNUAL MEET
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MINUTES OF THE 2005 ANNUAL MEETING
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REPORT OF THE VICE PRESIDENT—ADMI
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REPORT OF THE VICE PRESIDENT-ADMINI
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2005 EXAMINATIONS—SUCCESSFUL CAND
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OBITUARIESROBERT GRANT ESPIECLYDE H
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OBITUARIES 825SIDNEY M. HAMMER1931
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OBITUARIES 827J. GARY LaROSE1947—
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OBITUARIES 829PAUL J. SCHEEL SR.193
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OBITUARIES 831LEO M. STANKUSCirca 1
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INDEX TO VOLUME XCIIPage2005 EXAMIN
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835GRAVES, CLYDE H.INDEX—CONTINUE
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837INDEX—CONTINUEDREPORT OF THE V
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PROCEEDINGS May 15, 16, 17, 18, 2005 - Casualty Actuarial Society

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