A Macro Validation Dataset for US Hurricane
Models
CAS Ratemaking Seminar
Douglas J. Collins
March 13, 2001
Hurricane Model Validation - Examples
 Comparisons to historical event probabilities
 Frequency & Severity by time period/location
 Comparisons to historical wind speeds at locations
 Individual storms
 Historical maximums
 Comparisons to historical damage and insured loss
data
 Specific geographic area
 Individual company
 Industry
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Macro Validation Dataset
 Estimated industry insured losses for
 All storms producing hurricane winds over land
 Continental US
 By county
 1900-1999
 Adjusted to 7/1/2000 level, reflecting changes in
 Prices
 Wealth
 Housing units
 Insurance utilization
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Sample Components of Normalization Adjustment Camille, Hancock Cty, MS
297.4%
Inflation
222.8%
Housing Units
Utilization
Wealth
55.6%
36.1%
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Limitations of dataset
 Normalization process
 Inaccuracies in industry loss estimates
 Unavailability of insured losses prior to 1949
 Leveraging of trend factors
 Use of housing units as exposure measure
 Normalization vs. Probabilistic
 Random effects on historic record
 Probabilistic dependent on industry exposure set
 Probabilistic definition of event
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Results - Continental US
Frequency
Cat
1
2
3
4
5
All
#
0.62
0.38
0.47
0.15
0.02
1.64
%
37.8%
23.2%
28.7%
9.1%
1.2%
100.0%
Normalized Losses ($M)
AAL
76
243
934
1,579
41
2,873
Severity
%
122
2.6%
639
8.5%
1,986
32.5%
55.0% 10,529
2,071
1.4%
1,752
100.0%
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Results by Decade
00s
10s
20s
30s
40s
50s
60s
70s
80s
90s
All
F5
L5
Freq
1.5
2.0
1.5
1.7
2.3
1.8
1.5
1.2
1.6
1.3
1.64
1.80
1.48
AAL
3,194
3,626
6,440
1,669
2,712
2,321
2,874
1,096
1,363
3,435
2,873
3,327
2,218
Sev
2,129
1,813
4,293
982
1,179
1,289
1,916
913
852
2,642
1,752
1,948
1,522
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Results by State
Comparison of Normalized 20 Year Return and
Expected by State
TX
LA
MSAL
FL
20 Year
Expected
GASC
NC
VANJ
NYME
0
1000
2000
3000
4000
5000
6000
Estimated Industry Losses ($Millions)
8
Return Period Comparison to Model
16
14
Industry Loss ($B)
12
Norm CW
Norm TX
10
Norm FL
8
Mod CW
6
Mod TX
Mod FL
4
2
Exp
5
10
20
Return Period (Yrs)
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Return Period Comparison to Model
60
50
Industry Loss ($B)
Norm CW
40
Norm TX
Norm FL
30
Mod CW
Mod TX
20
Mod FL
10
25
50
100
Return Period (Yrs)
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Comparison to Model - Variation by State
Comparison of Model T and Normalized Expected
Losses by State
TX
LA
MSAL
FL
Model T
Normalized
GASC
NC
VANJ
NYME
-
200
400
600
800
1,000
1,200
1,400
1,600
Expected Losses ($Millions)
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Other Uses of Dataset
 Generate discussion about model assumptions
 Benchmark for comparing models
 Comparisons by event
 Comparisons by county
 Modify/Create your own
 collind@towers.com
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