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FLORIDA COMMISSION ON HURRICANE
LOSS PROJECTION METHODOLOGY
Post Office Box 13300, 32317-3300
1801 Hermitage Boulevard, Suite 100
Tallahassee, Florida 32308
(850) 413-1349
www.sbafla.com/methodology
Randy Dumm, Ph.D.
Insurance Finance Expert,
Florida State University
Barry Gilway
President/CEO & Executive Director,
Citizens Property Insurance Corporation
Lorilee Medders, Ph.D., Chair
Statistics Expert,
Florida State University
Floyd Yager, FCAS, Vice Chair
Actuary,
Florida Hurricane Catastrophe Fund Advisory Council
Bryan Koon
Director,
Florida Division of Emergency Management
Jack Nicholson, Ph.D.
Chief Operating Officer,
Florida Hurricane Catastrophe Fund
Kristin Piltzecker, FCAS, MAAA
Actuary,
Property and Casualty Industry
Robin Westcott
Insurance Consumer Advocate,
Florida Department of Financial Services
Robert Lee, FCAS
Actuary,
Florida Office of Insurance Regulation
Hugh Willoughby, Ph.D.
Meteorology Expert,
Florida International University
Jainendra Navlakha, Ph.D.
Computer Systems Design Expert,
Florida International University
November 1, 2013
The Honorable Rick Scott, Chairman
Governor
Plaza Level 02, The Capitol
Tallahassee, Florida 32399
The Honorable Pam Bondi, Secretary
Attorney General
Plaza Level 01, The Capitol
Tallahassee, Florida 32399
The Honorable Jeff Atwater, Treasurer
Chief Financial Officer
Plaza Level 11, The Capitol
Tallahassee, Florida 32399
Dear Trustees:
As Chair of the Florida Commission on Hurricane Loss Projection Methodology (Commission), I am pleased
to present to you the Report of Activities as of November 1, 2013. This report documents the eighteenth year of
the Commission’s work.
Section 627.0628, F.S., created the Commission as a panel of experts to be administratively housed in the State
Board of Administration but requires the Commission to independently exercise its power and duties. The
Commission is required to “…adopt revisions to previously adopted actuarial methods, principles, standards,
models, or output ranges every odd year.” Such revisions were made in compliance with the statute.
If you have any questions or comments regarding the work of the Commission, please call me at (850) 6458393.
Sincerely,
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Lorilee Medders, Chair
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Florida Commission on Hurricane Loss Projection Methodology
P. O. Box 13300
Tallahassee, Florida 32317-3300
Staff: 850-413-1349, Fax: 850-413-1344
Website: www.sbafla.com/methodology
Commission Members:
Lorilee Medders, Ph.D., Chair
Statistics Expert, Florida State University
Floyd Yager, FCAS, Vice Chair
Actuary, Florida Hurricane Catastrophe Fund Advisory Council
Randy Dumm, Ph.D.
Insurance Finance Expert,
Florida State University
Jack Nicholson, Ph.D., CLU, CPCU
Chief Operating Officer,
Florida Hurricane Catastrophe Fund
Barry Gilway
President/CEO & Executive Director
Citizens Property Insurance Corporation
Kristin Piltzecker, FCAS, MAAA
Actuary,
Property and Casualty Industry
Bryan Koon
Director,
Florida Division of Emergency Management
Robin Westcott
Insurance Consumer Advocate,
Florida Department of Financial Services
Robert Lee
Actuary,
Florida Office of Insurance Regulation
Hugh Willoughby, Ph.D.
Meteorology Expert,
Florida International University
Jainendra Navlakha, Ph.D.
Computer System Design Expert,
Florida International University
Vacant
Licensed Professional Structural Engineer
Professional Team Members:
Staff Members:
Mark Brannon, FCAS, MAAA, CPCU, Actuary
Jenni Evans, Ph.D., Meteorologist
Paul Fishwick, Ph.D., Computer Scientist
Ronald Iman, Ph.D., Statistician
Mark Johnson, Ph.D., Statistician, Team Leader
Greg McLellan, P.E., Structural Engineer
Richard Nance, Ph.D., Computer Scientist
Anne Bert
Leonard Schulte
Donna Sirmons
Ramona Worley
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Tom Schroeder, Ph.D., Meteorologist
Martin Simons, ACAS, MAAA, FCA, Actuary
Masoud Zadeh, Ph.D., P.E., Structural Engineer
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TABLE OF CONTENTS
Note: Page number references will be updated when changes are accepted.
PAGE
I.
Introduction
II.
Principles
13
III.
Commission Structure
16
IV.
Findings of the Commission
37
1. Concerning Model Accuracy and Reliability
38
2. Concerning Trade Secrets
40
Process for Determining the Acceptability of a Computer Simulation Model
41

56
V.
7
Model Submission Checklist
VI.
On-Site Review
57
VII.
2013 Standards, Disclosures, and Forms
64
1. Model Identification
65
2. Submission Data
66
3. Comparison of 2013 Standards to 2011 Standards
70
4. General Standards
71
G-1
Scope of the Computer Model and Its Implementation
71
G-2
Qualifications of Modeling Organization Personnel and Consultants 74
G-3
Risk Location
77
G-4
Independence of Model Components
78
G-5
Editorial Compliance
79
Form G-1
General Standards Expert Certification
81
Form G-2
Meteorological Standards Expert Certification
82
Form G-3
Statistical Standards Expert Certification
83
Form G-4
Vulnerability Standards Expert Certification
84
Form G-5
Actuarial Standards Expert Certification
85
Form G-6
Computer Standards Expert Certification
86
Form G-7
Editorial Certification
87
5. Meteorological Standards
88
M-1
Base Hurricane Storm Set
88
M-2
Hurricane Parameters and Characteristics
90
M-3
Hurricane Probabilities
92
M-4
Hurricane Windfield Structure
94
M-5
Landfall and Over-Land Weakening Methodologies
96
M-6
Logical Relationships of Hurricane Characteristics
97
Form M-1
Annual Occurrence Rates
98
Form M-2
Maps of Maximum Winds
101
Form M-3
Radius of Maximum Winds and Radii of Standard Wind Thresholds 102
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TABLE OF CONTENTS
PAGE
6. Statistical Standards {moved from below}
147
S-1
Modeled Results and Goodness-of-Fit
147
S-2
Sensitivity Analysis for Model Output
149
S-3
Uncertainty Analysis for Model Output
151
S-4
County Level Aggregation
153
S-5
Replication of Known Hurricane Losses
154
S-6
Comparison of Projected Hurricane Loss Costs
156
Form S-1
Probability and Frequency of Florida Landfalling Hurricanes
157
per Year
Form S-2A Examples of Loss Exceedance Estimates (2007 FHCF Exposure Data)158
Form S-2B
Examples of Loss Exceedance Estimates (2012 FHCF Exposure Data)xxx
Form S-3
Distributions of Stochastic Hurricane Parameters
159
Form S-4
Validation Comparisons
160
Form S-5
Average Annual Zero Deductible Statewide Loss Costs –
162
Historical versus Modeled
Form S-6
Hypothetical Events for Sensitivity and Uncertainty Analysis
163
7. Vulnerability Standards
V-1
Derivation of Vulnerability Functions
V-2
Derivation of Contents and Time Element Vulnerability Functions
V-3
Mitigation Measures
Form V-1
One Hypothetical Event
Form V-2
Mitigation Measures – Range of Changes in Damage
Form V-3
Mitigation Measures – Mean Damage Ratio (Trade Secret item)
103
103
107
109
111
114
116
8. Actuarial Standards
118
A-1
Modeling Input Data
118
A-2
Event Definition
120
A-3
Coverages {reordered from below}
xxx
A-4
Modeled Loss Cost and Probable Maximum Loss Considerations 121
A-5
Policy Conditions
123
A-6
Loss Output
126
Form A-1
Zero Deductible Personal Residential Loss Costs by ZIP Code
130
Form A-2
Base Hurricane Storm Set Statewide Losses
132
Form A-3A 2004 Hurricane Season Losses (2007 FHCF Exposure Data)
134
Form A-3B 2004 Hurricane Season Losses (2012 FHCF Exposure Data)
xxx
Form A-4A Output Ranges (2007 FHCF Exposure Data)
135
Form A-4B Output Ranges (2012 FHCF Exposure Data)
xxx
Form A-5
Percentage Change in Output Ranges (2007 FHCF Exposure Data) 138
Form A-6
Logical Relationship to Risk (Trade Secret item)
140
Form A-7
Percentage Change in Logical Relationship to Risk
143
TABLE OF CONTENTS
PAGE
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Form A-8
Probable Maximum Loss for Florida
144
{moved up}
9. Computer Standards
C-1
Documentation
C-2
Requirements
C-3
Model Architecture and Component Design
C-4
Implementation
C-5
Verification
C-6
Model Maintenance and Revision
C-7
Security
176
176
178
180
181
183
185
186
10. Working Definitions of Terms Used in the Report of Activities
187
11. References
204
VIII.
Inquiries or Investigations
206
IX.
Appendices
212
1. Forms
F-1
Agreement to Abide by Procedures for On-Site Visits
xxx
F-2
Agreement to Abide by Procedures for Closed Meetings
xxx
2. Florida Statutes, 2013
213
Section 627.0628
Florida Commission on Hurricane Loss Projection Methodology
xxx
Section 627.701(5)-(9)
Liability of Insureds, Coinsurance, Deductibles
xxx
TABLE OF CONTENTS
PAGE
3. Meeting Schedule and Topics of Discussion
217
4. Transcript Information
222
5. Commission Documentation
226
Figures
Figure 1
Florida County Codes
68
Figure 2
State of Florida Map by County
69
Figure 3
State of Florida and Neighboring States Map by Region
100
Figure 4
State of Florida Map by North/Central/South Regions
139
Figure 5
State of Florida Map by Coastal/Inland Counties
139
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Figure 6
Probability Distributions for Model Input Variables
164
Figure 7
Uncertainty Envelope for the Conversion Factor
166
Figure 8
Grid for Calculating Hourly Wind Velocities
167
Figure 9
Map Version of Grid for Calculating Hourly Wind Velocities
167
Figure 10
Comparison of Cumulative Empirical Distribution Functions of
Loss Costs for all Hurricane Categories
169
Figure 11
Contour Plot of Loss Cost for a Category 1 Hurricane
170
Figure 12
Contour Plot of Loss Cost for a Category 3 Hurricane
171
Figure 13
Contour Plot of Loss Cost for a Category 5 Hurricane
171
Figure 14
Standardized Regression Coefficients for Expected Loss Cost for
all Input Variables for all Hurricane Categories
173
Figure 15
Expected Percentage Reduction for Expected Loss Cost for all
Input Variables for all Hurricane Categories
174
8