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You are here: Home . bulletins . 2010 . cc29
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COMMISSIONER'S BULLETIN # B-0030-10

July 27, 2010


To: ALL INSURANCE COMPANIES, CORPORATIONS, MUTUALS, ASSOCIATIONS, LLOYDS, RECIPROCAL EXCHANGES, AND OTHER INSURERS WRITING PROPERTY INSURANCE IN THE STATE OF TEXAS.


Re: USE OF CATASTROPHE MODELS IN RATEMAKING

The purpose of this bulletin is to provide information to interested parties regarding the use of catastrophe models in property insurance ratemaking, whether the models determine the expected losses resulting from hurricanes, hail and windstorms, tornados, winter storms, fire following earthquakes, or any other type of catastrophe loss.

Chapter 2251 charges the Department of Insurance (Department) to promote the public welfare by regulating insurance rates to prohibit excessive, inadequate or unfairly discriminatory rates. As the chapter provides, insurers must submit rate filings and supporting information, including supplemental rating information used by insurers to determine the applicable premium for an insured. The information submitted by insurers must permit and enable the Department to carry out its charge of determining whether the insurer's rate meets the rate standards and how the rate is determined.

A company or entity using catastrophe models to develop a provision in their rates should include with its rate filing the data it considers appropriate to support its rate filing. This should include a comparison of the actual historical experience with the expected annual losses from the applicable catastrophe model and an explanation of the reasons for any differences between the actual historical and modeled expected losses; information on the model, including, for example, the number of simulated storms by intensity, and the types of storms (including their meteorological characteristics or description) or events modeled; a description of the company-supplied inputs to the model; company adjustments to the model or to the model output, including optional modeling features selected (e.g., demand surge); and a description of how the modeled results were integrated with the actual historical experience so as to avoid the double counting or understatement of expected future losses.

Questions regarding rate filings should be directed to the Property and Casualty Actuarial Division at (512) 475-3017.

J'ne Byckovski
Chief Actuary, P&C Actuarial Division
Property and Casualty Program



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Last updated: 09/16/2014

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