Homeowners rates that include a severe thunderstorm component based on sophisticated catastrophe modeling have been included as part of a rating plan subject to approval by state regulators in Florida.Florida Farm Bureau's 2003 Homeowners rate filing included a ground-breaking actuarial approach, which develops a distinct base rate for both hurricane and severe thunderstorm perils using hurricane and severe thunderstorm models from AIR Worldwide Corp. (AIR), a subsidiary of Jersey City, N.J.-based ISO. The models were also used extensively in the redefinition of territory lines and development of territory rating factors separately for each catastrophic peril.
"In the past, rates for severe thunderstorm losses were based on estimates of expected loss derived exclusively from historical data. But the localized effects of these storms and the sparse historical data for any given location, combined with the rapidly changing construction costs and demographics of the state, make reliance on data from past events less than ideal for rate-making purposes," says John Rollins, chief actuary at Florida Farm Bureau.
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