Crist, Sink Seek Storm Model Data

By MICHAEL FECHTER The Tampa Tribune

Published: Jan 9, 2007

Two Florida Cabinet officers said Monday they want more information about a dramatic change in hurricane damage forecasting used by the insurance industry.

Gov. Charlie Crist and Chief Financial Officer Alex Sink were responding to a story in The Tampa Tribune on Sunday about criticism of the change made by California-based Risk Management Solutions.

RMS now bases its projections on the next five hurricane seasons instead of historical storm data dating back 100 years, which had been the industry norm. In addition, RMS predicted where those projected storms might cause the most damage.

Two scientists, Florida State University geologist Jim Elsner and National Oceanic and Atmospheric Administration research meteorologist Thomas R. Knutson, told the Tribune that insurance industry objectives drove the change and faulted the company's scientific justification.

Crist told reporters the disclosure makes him skeptical about industry claims that all of the rate increases of the past year are valid.

"I'm kind of used to deceptive activity as a former attorney general," Crist said. "But that was rather disturbing to hear about that. We need to get as much information as we possibly can. This much I do know: Insurance companies are making extraordinary profits."

The RMS model has not been approved for use in Florida. Insurance industry officials say the forecasting change has not affected premiums.

"In Florida, we've got a model that goes beyond these controversies; it's the eight storms that wreaked havoc on us in two years' time," said Gary Landry, vice president of the Florida Insurance Council, an industry group.

The RMS model may not have been used directly in any rate increase, but reinsurers - who help determine rates when they purchase policies - use the modeling, too, said Steve Burgess, Florida insurance consumer advocate.

State regulators don't have access to records to determine how much reinsurance has driven up the costs that insurance companies incur when they try to spread their risk.

In addition, using the five-year projection during a heightened hurricane cycle may encourage companies to pare back their policies.

Lowering exposure to future storm damage can help insurance companies maintain good ratings with corporate analysts.

Insurers changed the modeling from a relatively short-term view to the 100-year projection after Hurricane Andrew hit Miami-Dade County in 1992. Paying for damage from Andrew helped drive several companies out of business and sent premiums soaring for the others. In response, insurers advocated a longer view to keep rates more stable.

"That was the promise. I heard it," said Robert Hunter, a former Texas insurance commissioner now with the Consumer Federation of America.

Insurance companies have reneged because of the heightened hurricane cycle, Hunter said.

The new RMS model could be reviewed next month by the Florida Commission on Hurricane Loss Projection Methodology. Burgess, the Florida consumer representative, sits on the commission along with statisticians, meteorologists and other experts.

Burgess pledged to keep an open mind in reviewing the new model but said it will be difficult to ignore the disavowal by scientists Elsner and Knutson, who were enlisted by RMS to review its work.

Reporter Jerome R. Stockfisch contributed to this report.