CAS RATEMAKING SEMINAR PROP-31 CURRENT ISSUES IN FLORIDA PROPERTY INSURANCE RATEMAKING By David R. Chernick

HURRICANE CLASS PLAN n History n Filed April 1999 n Effective July 2000 n Residential Class Plan n Developed

HURRICANE CLASS PLAN n HOW WAS THE CLASS PLAN DEVELOPED? n The Process used n Selection of rating variables n Selection of rating factors

HURRICANE CLASS PLAN The Process n Lack of Data n Lack of precedent n Input from Hurricane Modelers n Input from Wind Experts n Interaction of Rating Variables

HURRICANE CLASS PLAN Selection of Rating Variables Primary Factors n Construction n Secondary Water Resistance n Sheathing Attachment n Shuttering n Roof Straps n Roof Type

HURRICANE CLASS PLAN

HURRICANE CLASS PLAN Selection of Rating Variables Secondary Factors n Number of Stories n Roof Type n Patio Doors n Garage Door Bracing n Attached Carport/Porch n BCEGS

HURRICANE CLASS PLAN

HURRICANE CLASS PLAN Classification Definitions n Superior Sheathing/Attachment - Roof Sheathing with a minimum thickness of 1/2” attached to roof trusses/rafters by 8d nails or greater which are properly spaced or a AFG- 01 structural adhesive, that is continuously applied, per the manufacturer's instructions, on both sides of the truss/rafter with a 1/4” or greater bead between the sheathing and each truss/rafter over the entire length of the truss/rafter and its connection with the sheathing to within a foot of the roof overhang.

HURRICANE CLASS PLAN

HURRICANE CLASS PLAN Selection of Rating Factors Primary Factors

HURRICANE CLASS PLAN Selection of Rating Factors Secondary Factors

HURRICANE CLASS PLAN Impact of Rating Factors Primary Factors n Construction 4% - 20% n Secondary Water Resistance 5% - 25% n Sheathing Attachment 10% - 35% n Shuttering 18% - 42% n Roof Straps 3% - 8% n Roof Type 12% - 15%

HURRICANE CLASS PLAN Impact of Rating Factors Secondary Factors - Additive n Number of Stories +.05 n Roof Type -.15 n Patio Doors -.04 n Garage Door Bracing -.03 n Attached Carport/Porch -.05 n BCEGS -.07

HURRICANE CLASS PLAN n Rating Territories n Frequency accounted for by territory going up and down the coast n Severity accounted for by territory bands going inland from the coast

HURRICANE CLASS PLAN Territorial Base Rates

HURRICANE CLASS PLAN n All rate filings made on or after 3/1/2001 must comply with new provisions included in Section of the Florida Statues. n In general this statute requires reasonable premium reductions for housing features that reduce potential loss from windstorms

HURRICANE CLASS PLAN n Section Florida Statutes: n “A rate filing for residential property insurance must include actuarially reasonable discounts, credits, or other rate differentials, or appropriate reductions in deductibles, for properties on which fixtures or construction techniques demonstrated to reduce the amount of loss in a windstorm have been installed or implemented.”

HURRICANE CLASS PLAN n “The fixtures or construction techniques shall include, but not be limited to, fixtures or construction techniques which enhance roof strength, roof covering performance, roof-to-wall strength, wall-to-floor-to- foundation strength, opening protection, and window, door, and skylight strength.”

HURRICANE CLASS PLAN n “Credits, discounts, or other rate differentials for fixtures and construction techniques which meet the minimum requirements of the Florida Building Code must be included in the rate filing.”

HURRICANE CLASS PLAN n Informational Memorandum issued 2/21/02 by Florida DOI. n Asks for comments by 3/18/02 n A copy is included in my handout

HURRICANE CLASS PLAN n COMMERCIAL RESIDENTIAL

HURRICANE CLASS PLAN

n COMMERCIAL BUILDINGS

HURRICANE CLASS PLAN