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

ARCHITECTURE FOR RESIDENTIAL PROPERTY INSURANCE RATEMAKING 527Class Factors–Hurricane (Mitigation)Property insurance has always been rated by type of construction,but construction rating attributes were historically designedto rate the predominant peril of fire. The blunt distinction betweenframe and masonry wall construction was often deemedsufficient. As hurricane has replaced fire as the cause of lossunderlying the plurality of the base premium in some states,construction class plans should evolve accordingly. The modernrating architecture should include class plans based on distinctconstruction attributes for both fire and hurricane perils.In hurricane, a “mitigation” class plan focuses on features,techniques and devices specifically designed (and oftenretrofitted to the home after initial construction) to reduce suchlosses. As discussed earlier, Florida statutes now enumerate severaldevices that must be considered in the development of theclass plan. The public domain ARA study is also required readingfor those seeking to understand the rationale for the choiceof devices that serve as elements of the class plan. The studyfound that the following devices significantly reduce hurricanelosses and should be treated as “primary rating factors”:² Roof shape (gable, hip, flat, and others)² Roof covering (shingles compliant with FBC, shingles not compliantwith FBC, tile, metal, and others)² Secondary water resistance of roof (present in the form of tapedor sprayed sealant, or not)² Roof-to-wall connection (toe nails, clips, hurricane wraps ofsingle or double layers)² Roof deck attachment method (four categories based on nailsize and spacing)² Opening protection (engineered storm shutters, non-engineeredattachments such as anchored plywood, or none at all)