rms north atlantic hurricane models · 30/6/2015 · – g-1.5a: added word “types” – v-3.1:...

1Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. June 30, 2015

RMS® NORTH ATLANTIC HURRICANE MODELS

RiskLink 15.0 Build (1625)

Michael Young

FCHLPM 2013 StandardsPublic Hearing

March 16-19, 2015

Newark, CA


Overview: North Atlantic Hurricane Model Methodology

– Change in model

Change in Submission

Standards Section

– General

– Meteorology

– Vulnerability

– Statistics

– Actuarial

– Computer

OUTLINE

3Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. 3

OVERVIEW


FRAMEWORK FOR WINDSTORM CATASTROPHE MODELING

Stochastic Track

Wind Field Model

FinancialLoss

90%

Vulnerability

• Basin-wide track and parameter simulation and calibration

• Pressure history simulation and calibration

• Importance sampling of simulated tracks

• Time-stepping wind profile calculation

• Directional factors for surface roughness upstream of over-land location

• Variable Resolution Grid data resolution

• Engineering model calibrated with historical claims

• Hundreds of vulnerability classes based on material, height, occupancy, and year built

• Mitigation measures

• Allocates loss to policy holder, insurer, reinsurer


FROM HISTORIC STORMS TO STOCHASTIC WINDFIELDS

SampleStorms

Create Stochastic

Tracks

AssignWindfield

CalculateSurface

Roughness

CalculateWindfield

Landfall Rates

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VULNERABILITY METHODOLOGY

Over 1110 base curves per region (including all residential and commercial lines) developed separately for building and contents based on a combination of:

Construction class

Occupancy

Building height

Year Built

Square footage

Vulnerability Methodology

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Secondary Modifier Methodology

Building specific attributes or mitigation measures

– Modeled by scaling vulnerability functions up or down from the unknown vulnerability curve

0

10

20

30

40

50

60

70Basic vulnerabilityModified vulnerabilityModified vulnerability

MD

R (%

)

Wind speed (mph)50 180


The statewide zero deductible AAL on the FHCF aggregate exposure changes (Personal and Com Res combined) reduces by approximately 5%.

Number based on 2007 FHCF exposure

STATEWIDE MODEL CHANGE

Time Period Produced by ModelCurrent Submission $3.94 billionPreviously AcceptedSubmission

$4.12 billion

Percentage Change CurrentSubmission/PreviouslyAccepted Submission

-4.52%

Form S-5: AAL Zero Deductible Loss Cost


STATEWIDE CHANGES BY MODEL COMPONENT

Table 1, Page 37

Zero deductible Statewide Loss Cost

FHCF 2007 data

Statewide Percentage Difference

Component Module

Geocoding Hazard Vulnerability

-4.5% 0.0% -2.6% -1.9%

Changes come from both hazard and vulnerability changes


CHANGES IN MODEL

11Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. June 30, 2015Copyright © 2015 Risk Management Solutions, Inc. .

List of Changes in G1.5A

GEOCODING 2014 postal code vintage data has been incorporated as per our policy to update geocoding data at least every 24 months.

New proprietary geocoding engine service replaces third party engine


Version 15.0 will include an extension to the RMS Global geocoding engine

Address updates/validations for all NAHU countries,

Improved address matching for streets, postcodes, and cities globally

New resolutions:

3 (Block Face)

4 (Streetname)

GEOCODING UPDATES


HAZARD Update of Long Term Rates

• Based on HURDAT as of November 2013

• Reanalysis of 1931-1945

Historical Footprint Recreation updates

• 14 Historical windfields updated

Roughness Data Update

List of Changes in G1.5A


Reflects Nov. 2013 vintage of HURDAT2, which includes:

Updated rates to reflect changes to historical events between 1931-1945

HISTORICAL BASELINE RATES (LONG TERM RATES)

Activity through the 2012 hurricane season

Comply with standards of the FCHLPM

Source: "Florida's Hurricane History", by Jay Barnes

V13 V15Years 1900-2011 1900-2012

HURDAT Reanalysis Up to 1930 Up to 1945*

* Prior updates to HURDAT have been reflected in previous releases


1935 LABOR DAYHURRICANE

Changes in 1935 Labor Day

The most intense U.S. landfalling hurricane in recorded history

HURDAT Reanalysisincreased 1st landfallintensity by 20 kts (23 mph)

Weak Cat 5 Strong Cat 5


MODEL DEVELOPMENT PROCESS

Hazard:

SampleStorms

Create StochasticTracks

Landfall Rates

Calculate SurfaceRoughness

CalculateWind Field

AssignWind Field

930

940

950

960

970

980

990

1000

1010

-150 -125 -100 -75 -50 -25 0 25 50 75 100 125 150Distance from track (km)

Pres

sure

(mb)

low

er--

---w

ind

spee

d --

---h

ighe

r

PressureWind Speed

Event Set Generation:

CAT 1-2 CAT 3-5

CAT 1-2 CAT 3-5

New Data


ROUGHNESS DATA UPDATES

V15

RMS uses ASTER satellite data to develop roughness data layer Previous model uses varying

image vintage: 2001-2004 Resolution: 15m

Update required by new standards in FCHLPM Newer vintage satellite imagery

to capture growth of urbanization in last decade

Consistent with NLCD 2006


REGIONS

PRIMARY CHARACTERISTICS

SECONDARY CHARACTERISTICS

New Northern vulnerability region (inland and coastal)

Coastal regions redefined with new ‘smoother’ coastline

New Year Bands for post 2008

Revised relativity of high square footage bands for single family dwellings

New opening protection Secondary Modifiers

Revisions consistent with new year bands

Vulnerability changesList of Changes in G1.5A


IVAN RE-ANALYSIS PROVIDES EVIDENCE FOR NORTHERN REGION

Isolating “clean” claims Claims ratio by wind speed

Hurricane Ivan traditionally set aside in development and validation as surge contaminated storm because of Merizwa ruling of 2004


UPDATED VULNERABILITY REGIONS

Added two new wind vulnerability regions in Florida

Based on reanalysis of claims data from Hurricane Ivan (2004)

V13


V15Added two new wind vulnerability regions in Florida

Based on reanalysis of claims data from Hurricane Ivan (2004)

UPDATED VULNERABILITY REGIONS


NEW YEAR BANDS

v13 v15

Pre1995 Pre 1995

1995-2001 1995-2001

2002 +2002-2008

2009+

Changes to Year BandsReflects • Changes in building

code provisions such as introduction of ring shank nails in code

• Research on Roof Cover aging


FLOOR AREA DIFFERENTIATION

0%

20%

40%

60%

80%

100%

120%

140%

0-1,500 1,500-2,500 2,500-5,000 5,000-10,000 >10,000SFD Floor Area (sqft)

Single Family Dwellings:Ratio to Default SFD Floor Area at 100 mph

v13 v15

Floor Area credits adjusted for SFD

Will affect ‘niche’ clients writing large-valued homes significantly

Low impact on large RES portfolios with typical distribution of floor area

Wind-only


UPDATED SECONDARY MODIFIERS

New options related to separate mitigation of garage doors for pressure only

Consistent with updated FLOIR mitigation inspection forms

OIR-B1-1802 (Rev 01/12)


Geocoding:• 2014 Data• New

Geocoding Engine


Hazard:

- Addition of 1 year

- Changes in storms between 1931-1945

- Roughness data update


Vulnerability:- New Regions

(inland/coastal)- New Year

Bands- Coastal region

redefined


Total Changes


VALIDATION AGAINST INDUSTRY LOSSES

COMPARISON IN STANDARD S-5


Comparison to Portfolio Losses―Florida Residential

Comparison of modeled and actual losses for residential portfolios affected by hurricanes that made landfall in Florida – minor change

The results are normalized such that the maximum actual loss = $1,000,000 to protect client confidentiality


CHANGES IN SUBMISSION


RISKLINK 15.0 SUBMISSION TIMELINENov 2014

Jan 2015

June 2015

Submission of RiskLink v15.0 (Build 1625)

Deficiencies Corrected

FCHLPM Public Hearing

March 2015 OnSite Audit


• DLM acronym spelled out• Missing response to Disclosure 5.A.2 in Standard G-1• Revised Disclosure 3.B in Standard G-2 regarding

independent peer reviews• Added list of all modified hurricanes in Form M-1 E.• Corrected citation to Table 44 – changed to reference

Figure 43– Figure 43 replaced with correct figure

DEFICIENCIES CORRECTED

Deficiencies noted by the commission were addressed and sent to the commission January 7, 2015.


• Tenure correction for 3 staff• Correction of Figure 37 and Table 13 in Disclosure S-5.1:

client exposure sets incorrectly run• Form S-5 Update: Correction of number of years used in

historical AAL figure• Form A-2 Update: Correction of number of years used in

calculation of loss contribution values• Form A-7 Update: Incorrect county assignment for one

LRTR point in form generation caused coastal / inland stats to be under/over stated respectively

• Form A-8 update: Event AL081933 incorrectly included in Form.

• Edit to Jayant S. title in Appendix B

OTHER CORRECTIONS

Corrections were also included in revised submission sent to the commission January 7, 2015.


• Revisions to text for clarity– G-1.2: References to Hall and Jewson corrected– M-4.7: corrected number of years for satellite imagery– C-4.1: removed unsupported operating system– Corrected Table 56 caption– V-2.3: Removed “ Without content policy”– G-1.5A: added word “types”– V-3.1: added word “types”– V-1.12: added language about assumptions for

unknown SQFT• Form V-2 Update: Discovered that RMS had not used

correct zip code in analysis – regenerated forms

CORRECTIONS DURING ONSITEAUDIT

All corrections reviewed with Profession Team on 3/16/15 through 3/18/2015


GENERAL STANDARDS


• Model version number: RiskLink 15.0 (Build 1625) • Scope of the model includes personal and commercial

residential risks.• Minor changes made to model as described in overview

slides earlier and submission document in G-1.5• RMS maintains a documented process for the model.

Standard Verified

STANDARD G-1: SCOPE OF THE COMPUTER MODEL AND ITS IMPLEMENTATION


• Employee/client statistics and biographies updated

• Professional credentials updated to reflect changes in the model team and relevant employment status relating to current or previous model development.

• Previous Independent Peer Reviews continue to be relevant to version

• Forms G-1 to G-7 Expert Certifications updated with each revision cycle

Standard Verified

STANDARD G-2: QUALIFICATIONS OF MODELER PERSONNEL AND CONSULTANTS


• ZIP Code data vintage is February 2014 –United States Postal Service.

• ZIP Code information is examined by RMS for consistency and is subject to standardized quality control testing and checking by experts employed by RMS for that purpose.

• If a building location is entered as a ZIP Code, the RMS model uses wind speeds that are exposure weighted averages of wind speeds throughout the ZIP Code, based on population data.

Standard Verified

STANDARD G-3: RISK LOCATION


• The vulnerability, meteorological, and actuarial model components are theoretically sound and each has been thoroughly and independently tested and calibrated.

• They have also been tested in an integrated way to ensure that the relationships between the components are reasonable.

Standard Verified

STANDARD G-4: INDEPENDENCE OF MODEL COMPONENTS


• All documents provided to the Commission throughout thereview process were reviewed and edited by a person orpersons with experience in reviewing technicaldocuments.

• Submission document is managed with the same source control system used on the computer code and development tools.

• Form generation process is documented including flow charts

Standard Verified

STANDARD G-5: EDITORIAL COMPLIANCE


METEOROLOGICAL STANDARDS


• The frequency of the stochastic set used by RMS in both calibration and validation is consistent with National Hurricane Center HURDAT data as of August 15, 2013 or later

– Model developed and validated with HURDAT data as of November 2013 which includes the 2012 season

• No short term or long term modifications made to historical data

Standard Verified

STANDARD M-1: BASE HURRICANE STORM SET


• Hurricane parameters and characteristics in the RMS model are modeled and validated using information documented in accepted literature.

• The windfield model directly simulates surface winds as 1-minute mean winds over water.

• Representation of storm parameters unchanged from previous model

Standard Verified

STANDARD M-2: HURRICANE PARAMETERS AND CHARACTERISTICS


• Hurricane probability distributions of hurricane parameters and characteristics are consistent with historical hurricanes in the Atlantic basin.

• Hurricane intensities in the Base Hurricane Storm Set and model are defined using the maximum one-minute sustained 10-meter wind speed.

Standard Verified

STANDARD M-3: HURRICANE PROBABILITIES


• No change in windfield methodology from previous model

• Windfields generated by the model are consistent with observed historical storms which affected Florida.

• LULC roughness layer has been updated to be consistent with NLCD 2006

• Reviewed updated historical recreations of LaborDay03 (1935) and NoName09 (1945) hurricanes with professional team.

Standard Verified

STANDARD M-4: HURRICANE WINDFIELDSTRUCTURE


• No change in treatment of over-land decay from previous model.

• Over-land weakening methodologies are consistent with historical records and advances the current state-of-the-science.

– RMS’ methodology has been published in Monthly Weather Review Vol. 138, No. 6. (Colette et al. June 2010)

• Transition of winds from water to land is consistent with state-of-the-science and validated against measurements published in Masters (2004).

Standard Verified

STANDARD M-5: LANDFALL AND OVER-LAND WEAKENING METHODOLOGIES


• Windfield is physically consistent with accepted scientific principles and historical hurricane characteristics

– Magnitude of asymmetry increases as translation speed increases all other factors held constant

– Mean wind speed decreases with increasing roughness all other factors held constant

Standard Verified

STANDARD M-6: LOGICAL RELATIONSHIPS OF HURRICANE CHARACTERISTICS


STATISTICAL STANDARDS


• RMS uses empirical methods in model development and implementation to match stochastic storm generation to historical data. These methods are supported by those described in currently accepted scientific literature

• The chosen distributions have been shown to have reasonable agreement with the historical data

• Wind speeds have been extensively validated against available data

• Uncertainty analysis provided

• All required forms provided

Standard Verified

STANDARD S-1: MODELED RESULTS AND GOODNESS-OF-FIT


• RMS has assessed the sensitivity of temporal and spatial outputs with respect to the simultaneous variation of input variables using currently accepted scientific and statistical methods

• The most sensitive aspects of the model are the intensity and size of the hurricane at landfall

• Form S-6 has been provided with a previous submission.

Standard Verified

STANDARD S-2: SENSITIVITY ANALYSIS FOR MODELED OUTPUT


• RMS has performed an uncertainty analysis on the temporal and spatial outputs with respect to the simultaneous variation of input variables using currently accepted scientific and statistical methods

• The major contributors to the uncertainty in model outputs are the intensity and size of the hurricane at landfall

• Form S-6 has been provided with a previous submission.

Standard Verified

STANDARD S-3: UNCERTAINTY ANALYSIS FOR MODELED OUTPUT


• The standard error of each output range at the county level of aggregation is less than 2.5% of the loss cost estimate

Standard Verified

STANDARD S-4: COUNTY LEVEL AGGREGATION


• The RMS model is able to reliably and without significant bias reproduce incurred losses on a large body of past hurricanes, both for personal residential and commercial residential

• Form S-4 has been provided

Standard Verified

STANDARD S-5: REPLICATION OF KNOWN HURRICANE LOSSES


• The difference between historical and modeled annual average statewide loss costs is statistically reasonable, given the body of data, by established statistical expectations and norms.

• Form S-5 has been provided

Standard Verified

STANDARD S-6: COMPARISON OF PROJECTED HURRICANE LOSS COSTS


VULNERABILITY STANDARDS


A. Vulnerability functions are based on well-supported structural and wind engineering principles and detailed analyses of historical claims data

– Over $11 billion of hurricane loss data from the U.S. used in the development and calibration of the vulnerability functions

– A breakdown of the loss data by occupancy and coverage type was presented to the Professional Team

B. The methods used to derive vulnerability functions and their associated uncertainties are theoretically sound

– The data and methods used to derive the vulnerability functions for appurtenant structures, contents, time element losses and commercial residential buildings was presented to the Professional Team

– A description of how the uncertainties in the vulnerability functions are derived from historical loss data was presented to the Professional Team

STANDARD V-1: DERIVATION OF VULNERABILITY FUNCTIONS (1 / 3)


C. The residential building stock classification is representative of Florida construction for personal and commercial residential properties

– The schema used to classify buildings and assign vulnerability functions can represent all types of Florida construction for personal and commercial residential properties

D. Primary classification variables used in the model account for the construction type, number of stories, year of construction and other construction characteristics

– Over 1110 unique functions in each vulnerability region of which 341 are applicable to residential lines



E. Separate vulnerability functions derived for:– Commercial residential buildings, personal residential

structures and mobile homes

– Appurtenant structures use same function as main structure, but can be input separately

F. Minimum wind speed generates damage– 50 mph peak gust = ~42 mph one minute sustained

G. Wind vulnerability functions include damage due to wind speed and pressure, water infiltration, and missile impact. Wind vulnerability functions exclude damage due to flooding, storm surge and wave action.

Standard Verified



A. Development of content / time element functions is primarily based on detailed analysis of claims data.

B. The relationship between the modeled building and contents vulnerability functions and historical structure and contents losses is reasonable.

o Relationship unchanged from previous version

C. The derivation of the time element functions considers the estimated time to repair or replace the property inferred from the time element claims and exposure values provided by insurance companies.

D. Relationship of Time element and Building Functions

o Time element losses depend on damage to structure, and have been validated by claims data

E. Time Element Vulnerability functions implicitly include claims arising from damage to infrastructure

Standard Verified

STANDARD V-2: DERIVATION OF CONTENTS AND TIME ELEMENT VULNERABILITY FUNCTIONS


A. RMS uses secondary modifier functions to reflect specific attribute information referenced in OIR “Informational Memorandum 02-0470M” and can be used to reflect mitigation measures

– Measures updated to reflect OIR-B1-1802 (2012)

B. The application of modifier options are reasonable when applied individually and in combination as shown in FormV-2 / Form V-3.

Standard Verified

STANDARD V-3: MITIGATION MEASURES


ACTUARIAL STANDARDS


• Adjustments made to insurance company input data are based upon accepted actuarial, underwriting, and statistical procedures.– Discussed analysis of Hurricane Ivan (2004) data to

remove contribution of storm surge.

• The model output report shows all modifications, adjustments, assumptions, inputs and/or input file identification, and defaults necessary to use the model.

Standard Verified

STANDARD A-1: MODELING INPUT DATA


• Modeled loss costs and probable maximum loss levels reflect all insured wind related damages, including time element loss costs due to infrastructure damage.

- There is no change in the definition of an event or the handling of by-passing storms in the model.

- The model loss costs do not include direct flood or storm surge.

Standard Verified

STANDARD A-2: EVENT DEFINITION


• The methods used in the development of contents and time element loss costs are actuarially sound.

– There is no change to methodology or relationships among coverages

Standard Verified

STANDARD A-3: COVERAGES


• Loss cost projections and probable maximum loss levels do not include:– expenses, risk load, investment income, premium reserves,

taxes, assessments, or profit margins;

– prospective provisions for economic inflation;

– any provision for direct hurricane storm surge losses.

• Loss cost projections and probable maximum loss levels are capable of being calculated at a latitude-longitude level and include actuarially sound demand surge provisions.

Standard Verified

STANDARD A-4: MODELED LOSS COST AND PROBABLE MAXIMUM LOSS CONSIDERATIONS


• The methods used in the development of mathematical distributions to reflect the effects of deductibles and policy limits are actuarially sound and are calculated in accordance with Florida law.

• The relationships among the modeled deductible loss costs are reasonable.

Standard Verified

STANDARD A-5: POLICY CONDITIONS


• The methods, data, and assumptions used in the estimation of probable maximum loss levels shall be actuarially sound.

• Loss costs exhibit logical relationships to risk, particularly in respect to– Construction– Hazard mitigation features– Building codes– Policy terms and coverages

• Output ranges are logical for the type of risk being modeled.

• Output ranges reflect lower costs for– Masonry vs. frame– Personal residential vs. mobile home– North vs. South and Inland vs. Coastal

Standard Verified

STANDARD A-6: LOSS OUTPUT


COMPUTER STANDARDS


• Computer Standards document binder – On-line, in central location– Folder hierarchy indexes material by standard– Covers all software relevant to submission– Includes documentation external to source code

• Binder created for RiskLink 15.0 to reflect:– Table of Model updates (Standard G-1, Disclosure 5)

Standard Verified

STANDARD C-1: DOCUMENTATION


• RMS maintains a complete set of requirements for all model components, databases, and data files.

• Requirements covered in various documents outlined in disclosure C-2.1

• Model updates for RiskLink 15.0 reflected in requirements documents where appropriate

oIndexed in table as required by Standard C-1.D

Standard Verified

STANDARD C-2: REQUIREMENTS


• RMS maintains model architecture and component design documentation that includes:

– Control flow diagrams

– Data flow diagrams

– Interface specifications

– Data schema documentation

• RMS reviewed examples with Professional Team such as form generation process and form dependencies

Standard Verified

STANDARD C-3: MODEL ARCHITECTURE AND COMPONENT DESIGN


• RMS complies with implementation standard by:– Coding guidelines contain standards for software and data

development

– Data procedures documented – Flow diagrams can be traced to code level– Count of lines of code and comment lines maintained for all

components– Comments within code allow components to be

comprehensible– Equations, formulas, and source code terms

for G-1.5 changes

Standard Verified

STANDARD C-4: IMPLEMENTATION


• RMS maintains:A. Procedures for general testing and verificationB. Procedures for component testing including

o Testing softwareo Unit testo Regression testso Aggregation tests

C. Procedures for data testingo Testing softwareo Procedures to ensure integrity, consistency, and

correctness of databases and data files.

• RMS reviewed examples of these with professional team onsite

Standard Verified

STANDARD C-5: VERIFICATION


A. RMS maintains a comprehensive procedures for full life cycle development including model revision, verification and validation of components, databases and data files.

B. RMS model revision policy reflects new model version number when any change in model occurs

C. RMS uses bug tracking systems to identify errors and changes to code, data and documentation.

D. RMS maintains a history of all model revisions

Standard Verified

STANDARD C-6: MODEL MAINTENANCE AND REVISION


• RMS has documented and implemented security procedures for access to code, data, and documentation– Security requirements documented and enforced by RMS Legal

and Information Technology Departments

– Company personnel are trained in security requirements and procedures as part of the company’s significantly revised and expanded training process

Standard Verified

STANDARD C-7: SECURITY

rms north atlantic hurricane models · 30/6/2015 · – g-1.5a: added word “types” – v-3.1:...

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