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Hurricane Class Plans

Hurricane Class Plans. Michael A. Walters FCAS, MAAA CAS Ratemaking Seminar March 11-12, 1999. Topics of Discussion. Why a separate class plan How to create from a single model How to use multiple sources Deciding cost/effective class variables Standards and considerations

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Hurricane Class Plans

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  1. Hurricane Class Plans Michael A. Walters FCAS, MAAA CAS Ratemaking Seminar March 11-12, 1999

  2. Topics of Discussion • Why a separate class plan • How to create from a single model • How to use multiple sources • Deciding cost/effective class variables • Standards and considerations • Selecting a base class • Adjusting to new base class

  3. Why a separate class plan? • Hurricane doesn’t vary with traditional homeowners factors • Not by protection class • Not by policy form • Not the same way by construction, amount of insurance, deductible

  4. How to use a single model • For base class, use single house in each zip code at base coverage • For each class, run model for single house by zip code • Track relationship to base by zip • Use mapping software to group similar zip code relationships • Publish relativities by zone or statewide

  5. How to use multiple sources • Decide what variables to include • Survey sources for relativities • Use several zip codes around state • Delphi technique for outliers • Apply actuarial judgment • Peer review by engineering experts

  6. Decide rating variables • Roof - shape, covering, waterproof sheathing, pitch, overhang • Connections - straps, nailing (size,spacing) • Windows and Doors - shuttering, garage door size & bracing, glazing • House Features - stories, porches, construction • Environment - terrain, debris exposure

  7. Standards • Homogeneous • No clear subsets of large different loss potential • Reasonably related to loss hazard • Well Defined • Exhaustive and mutually exclusive • No ambiguity in placement • No manipulation by insureds • Practical • Reasonable cost to administer • Able to be tested by actual loss data

  8. Considerations • Prioritize items that insureds can change • Use results from mitigation programs • Combine categories to control number of classes • Measure interaction among variables • May need on-site survey by independent professionals

  9. Selecting/Adjusting Base Class • Base Class • Generally the prevailing condition • Discounts for other classes • Sample: gable roof, no shutters, no roof clips • Adjust Loss Costs to New Base • Estimate distributions of classes • Use class relativities to calculate off-balance

  10. Base Class Assumptions (italics) • Roof • Shape - gable unbraced, gable braced, hip, flat • Cover - Shingle, tile, slate, metal, poured concrete • Waterproof sheathing underlayment - No, yes • Pitch - <10d, 10-30, >30 degrees • Overhang - <16,16-36, >36 inches • Connections • Hurricane Clips - No, yes: at roof, at foundation • Sheathing Attachment - 6d nails, 8d nails

  11. Base Class Assumptions (italics) • Windows and Doors • Shuttering - None, ordinary, hurricane resistant (debris impact) • Glass patio doors - Yes, no • Garage doors - single-wide, double-wide; braced, unbraced • Laminated glass - No, yes

  12. Base Class Assumptions (italics) • House Features • Number of stories - one, >one • Porches/canopies/carports - Yes, no • Construction - frame, masonry: reinforced? • Year Built/Code Enforcement - before 1995/not enforced, other • Environment • Suburban light tree cover, dense • Other - waterfront, urban, rural

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