The Karen Clark & Company (KCC) US Hurricane Reference Model Version 4.0 has been certified by the Florida Commission on Hurricane Loss Projection Methodology (FCHLPM).
The FCHLPM reviews and audits methodologies for projecting hurricane losses.
According to the announcement, KCC’s US Hurricane Version 4.0 has become the first certified model to explicitly account for climate change and excess litigation.
“Version 4.0 of the KCC Hurricane Model includes several enhancements, most importantly the explicit incorporation of the effects of climate change on hurricanes to date,” said Dr. Daniel Ward, KCC Director of Model Development.
“KCC scientists conducted a detailed analysis of how warming temperatures have been impacting hurricane intensities since 1900. The results, revealing a shift toward more severe hurricanes, are incorporated into the Hurricane Reference Model used for ratemaking and PML analyses in Florida and other states.”
The Version 4.0 model also incorporates re-intensification of hurricanes over the Gulf of Mexico. As hurricanes that enter the warm Gulf after landfall can regain strength, Dr. Ward explains, the model was finely tunedl to capture how climate change is altering storm intensities and landfall locations along the Gulf Coast.
In addition, KCC scientists and engineers carried out comprehensive research on the patterns and causes of Florida’s disproportionately high number of litigated claims.
The Version 4.0 model includes an excess litigation factor for single-family homes that accounts for current trends, along with the positive impacts of recent legislative actions in the state.
The updates ensure that KCC is providing insurers with the most accurate information for their pricing, underwriting, and risk management decisions, the firm stated.
Glen Daraskevich, KCC Senior Vice President, commented: “The FCHLPM certification process, as always, was a rigorous examination of the model assumptions and methodologies.
“By meticulous analysis, the KCC team of experts in meteorology, engineering, statistics, actuarial science, and computer science ensures the KCC models stay up to date with the advancing climate and atmospheric data.”
