Stop WINING : Property Data and CAT Modeling: See the Light, Get it Right!

Size: px

Start display at page:

Download "Stop WINING : Property Data and CAT Modeling: See the Light, Get it Right!"

Scarlett Snow
6 years ago
Views:

1 Stop WINING : Property Data and CAT Modeling: See the Light, Get it Right! Rep Plasencia - Area Senior Vice President, Risk Placement Services Lori Flemming - Managing Director, American Appraisal

Changes in Underwriting Improved underwriting discipline dictated by the markets

data analysis (valuation and COPE data) Loss experience analysis Increased focus on

models affect expected loss predictions (PML and AAL) Carriers are requiring more

2 Changes in Underwriting Improved underwriting discipline dictated by the markets Increased emphasis on a consistent, disciplined approach to underwriting: Exposure data analysis (valuation and COPE data) Loss experience analysis Increased focus on geography Appraisal requirements for insured properties Ever-changing catastrophe models affect expected loss predictions (PML and AAL) Carriers are requiring more data and many standard markets are cutting back capacity, especially in high hazard areas. 2

3 Questions to ask yourself Are you confident that your statement of values accurately reports all of your insurable property? Have you kept pace with the change in assets within your facilities? Do you know where your properties data came from? How well was your statement of values received when last marketed? Did you receive pushback from underwriters? 3

4 Cost Trends (2% per year) Significant construction inflation in 2004 (10.5%) Slowing from Commodities caused drastic increases in 2008 Prices fell back with economy in 2009 Inflation stabilized in Most recent 12 months: 3% Outlook for remainder of 2014: 2% 25% - 30% inflation in seven years 4

5 COPE Data Underwriters are interested in receiving more than just a valuation; they also want COPE data: Construction (frame, brick, masonry, masonry veneer, etc.) Occupancy (how the building is being used) Protection (quality of the responding fire department, adequacy of water pressure & water supply, the presence or absence of smoke alarms, etc.) Exposure (risks of loss posed by neighboring property or the surrounding area -- takes into consideration what is located near the property, such as an office building, a subdivision or a fireworks factory) 5

6 Why is COPE Data Important? Used in catastrophe modeling programs Applied to individual insureds and insurance company property portfolios Uses historical data» Financial» Meteorological» Engineering Estimates losses for catastrophic (CAT) events Adopted by insurers and rating agencies in CAT management and financial analysis models Defaults to worst-case scenario if data is not available Primary vs. Secondary COPE Data 6

7 CAT Risk Modeling: True Impacts The entire insurance industry is impacted by CAT Modeling, no matter which software package is used: RMS AIR EQECAT Proprietary/blended models Models are constantly updated 7

8 How do Insurance Companies use CAT Models? The goal of CAT modeling is to lend consistency to the overall cost of risk Manage aggregate exposure over their entire portfolio of risk Purchase re-insurance protection Underwrite individual risks (impact on the overall portfolio of risk) Charge the appropriate premium for the risk 8

9 How Do Insureds Use Catastrophe models? See how the insurance industry views your risk Have an idea of your expected losses and/or your Probable Maximum Loss (PML) Identify high hazard locations Aid in determining/purchasing adequate limits 9

10 Primary COPE Data Occupancy type Number of Stories Class of construction Year of construction 10

11 What is Secondary COPE Data? More detailed structural / location specific data elements, specific to Windstorm/Hurricane Earthquake Primary COPE data must be reported for the Secondary factors to apply and matter The concern relates to maintenance of the building envelope during an event to protect the contents: How solid are the walls? How strong is the roof & covering? How susceptible to peril are the contents? 11

12 Secondary COPE Elements Construction quality Roof covering Roof age Roof geometry Roof anchor Roof equipment hurricane bracing Basement Appurtenant structures Elevation of flood defenses Exterior cladding type Roof sheathing attachment Frame-foundation connection Ground level equipment Opening protection Flashing and coping quality Content grade Year upgraded 12

13 13

14 Renewal Results Additional underwriting data has produced significant reductions in the PML and AAL estimates and lower premiums for many accounts Additional underwriting data and has made it easier to buy more insurance coverage for many accounts Additional underwriting data can make accounts more attractive to insurance carriers increased competition can yield better results Increased data can also help significantly post-loss: Eliminates argument on building valuations or condition of building 14

15 Q&A Questions? 15

QUICK GUIDE. An Introduction to COPE Data. Copyright 2017 AssetWorks Inc. All Rights Reserved. For more information visit,

QUICK GUIDE. An Introduction to COPE Data. Copyright 2017 AssetWorks Inc. All Rights Reserved. For more information visit, QUICK GUIDE An Introduction to COPE Data An Introduction to COPE Data The collection of COPE data is important for organizations. It s four data categories construction, occupancy, protection, and exposure