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New Hurricane Computer Model Could Lead to Rise in Rates

Risk Management Solutions (RMS), one of the top producers of software used by insurance companies to estimate hurricane losses, is scheduled to release a new...
January 5, 2011

Risk Management Solutions (RMS), one of the top producers of software used by insurance companies to estimate hurricane losses, is scheduled to release a new computer model this spring that reportedly will dramatically raise its estimation of the risk of a hurricane in parts of Florida previously thought to be safe. It is almost certain that the model will cause more homeowners rate increases and policy cancellations.

The new model revises the way it treats hurricane winds, the effectiveness of safety features and the economic repercussions of a disaster. Based on recent storms, particularly Hurricane Ike, which tracked northward up the Ohio River Valley in 2008, RMS has concluded that storms do not lose their intensity over land as rapidly as previously thought. The result of the new model is a redrawn map showing interior parts of the country at risk, with a 25 percent increase in expected annual hurricane losses from Texas to Maine. For large portions of the interior of Florida, hurricane risk rises steeply, climbing from 140 to 200 percent for frame homes in the central part of the state. RMS spokeswoman Carolyn Krehel downplayed any link between the new model and the cost of homeowners insurance, saying that model changes do not directly translate to changes in insurance rates.

Click here to read Florida Insurance Pain Set to Deepen (Sarasota Herald Tribune 12/30/10)

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