Guy Carpenter recently had a nice briefing on RMS’s movement to version 11 of its North America hurricane model. RMS is the market leader in cat modeling and its changes will influence what reinsurers charge for property covers. That, in turn, will affect the consumer price for homeowners and commercial property insurance.
According to the conventional wisdom – well, RMS’s own wisdom – the new model should decrease losses close to shore while increasing them inland – a bit of a reaction to Hurricane Ike in 2008. Cat costs in Texas and the Carolinas were projected to rise while Florida would catch a break.
In a bit of death by meta-ing, the reality of what the models actually revealed often differed from what RMS said the models would reveal. A company’s Texas portfolio might fail to show the predicted increase while its Florida portfolio would see model losses increase. GC’s brief basically says that RMS projected a broad result and your mileage may vary.
As evidence, GC publishes two graphics that compare the two leading models – RMS’s latest and AIR Classic – in estimating losses in Florida’s portfolio. (GC got the data from the Florida Commission on Hurricane Loss Projection Methodology.)